FINAL NOTICE

Ms Linda Carole Stuart
t/a Rosemount Financial Enterprises
St Christopher House
217 Wellington Road South
Stockport
SK2 6NG

ACTION

1. With effect from 1 April 2014, Linda Carole Stuart trading as Rosemount Financial

Enterprises was granted interim permission pursuant to article 56 of the Financial
Services And Markets Act 2000 (Regulated Activities) (No 2) Order 2013 to carry on
the regulated activities of:

(a) Debt adjusting under article 39D of the RAO; and

(b) Debt-counselling under article 39E of the RAO.

2. By an application dated 30 December 2014 Ms Stuart applied under section 55A of

the Act for Part 4A permission to carry on those regulated activities. The application
was completed by the provision of further information on 21 April 2015.

3. For the reasons given in the Decision Notice issued on 13 October 2015 and in

accordance with section 55X of the Act, the Authority has decided to refuse the
application.

4. As a result of the Decision Notice, pursuant to article 58(1)(a) of the Financial

Services and Markets Act 2000 (Regulated Activities) (No 2) Order 2013, Ms Stuart’s
interim permission ceased on 13 October 2015.

SUMMARY OF REASONS

5. The Authority cannot ensure that, in relation to the regulated activities for which

permission is sought, Ms Stuart will satisfy, and continue to satisfy, the Threshold
Conditions.

6. By its Warning Notice the Authority gave notice that it proposed to refuse the

Application and that Linda Carole Stuart was entitled to make representations to the
Authority about that proposed action.

7. By its Decision notice issued on 13 October 2015, the Authority gave Linda Carole

Stuart notice that it had decided to take the action described above.

8. Linda Carole Stuart had 28 days from the date the Decision Notice was given to refer

the matter to the Tribunal. No referral was made to the Tribunal within this period of
time or to date.

9. Under section 390(1) of the Act, the Authority, having decided to refuse the

Application and there having been no reference of that decision to the Tribunal, must
give Linda Carole Stuart Final Notice of its refusal.

DEFINITIONS

10.
The definitions below are used in this Notice.

the “Act” means the Financial Services and Markets Act 2000;

the “Authority” means the Financial Conduct Authority;

“CONC” means the Consumer Credit sourcebook in the Handbook;

“COND” means the section of the Handbook entitled “Threshold Conditions”;

“the Decision Notice” means the decision notice dated 13 October 2015. as given
to the firm by the Authority.

“IVA” means Individual Voluntary Arrangement;

“SYSC” means the section of the Handbook “Senior Management Arrangements,
Systems and Controls”;

the “Handbook” means the Authority’s Handbook of Rules and Guidance;

the “OFT” means the body in existence prior to 1 April 2014, known as the Office
of Fair Trading;

“OFT Guidance” means the Debt Management Guidance dated March 2012 issued
by the OFT;

“Principle” means one of the Authority’s Principles for Businesses;

the “RAO” means the Financial Services and Markets Act 2000 (Regulated
Activities) Order 2001;

“Threshold Conditions” means the conditions set out in Schedule 6 to the Act for
which the Authority is responsible; and

the “Tribunal” means the Upper Tribunal (Tax and Chancery Chamber).

“the “Warning Notice” means the warning notice dated 8 July 2015 as given to
the firm by the Authority.

FACTS AND MATTERS

11.
Ms Stuart traded as a debt management firm under the trading name

“Rosemount Financial Enterprises” from 29 February 2008. From then until 31 March
2014 she was licensed and regulated by the OFT.

12.
On 1 April 2014, Ms Stuart became regulated by the Authority under Interim

Permission reference 613432. Ms Stuart applied for full authorisation on
30 December 2014.

13.
Ms Stuart applied for permission to conduct the regulated activities of Debt-

counselling and Debt adjusting. Ms Stuart’s business model entails sourcing indebted
customers who are seeking debt advice. Ms Stuart states that the advisers will assess
a customer’s circumstances and provide relevant debt advice. They may refer
consumers to alternative providers of debt solutions (for example, providers of IVAs),
or to providers of free debt advice, or they may advise consumers to enter into a
debt management plan. Many of Ms Stuart’s customers were obtained by her through
the purchase of a book of business from another debt management firm.

Standard documentation

Pre-contractual information

14.
Having reviewed the standard pre-contractual information provided by Ms Stuart,

the Authority is not satisfied that these documents meet the Authority’s regulatory
requirements in the following respects:

(a) They fail to provide (in a durable medium) information on the total cost of the

firm's service or an estimate of the anticipated likely total cost (contrary to the
rule in CONC 8.3.1(3)). This requirement was derived from paragraph 3.40c of
the OFT Guidance, which cited the failure to provide details of the total cost (or
anticipated likely cost) in pre-contractual information in relation to debt
management contracts as an example of an “unfair or improper business
practice”.

(b) They fail to provide (in a durable medium) information about the consequences

on the customer's credit rating, including how long the matter will show on the
customer's credit file and that the customer may not be able to obtain credit or
other financial services in the future (contrary to the rule CONC 8.3.1(10)). This
requirement was derived from paragraph 3.38e of the OFT Guidance, which cited
failing to provide adequate information to the consumer about the likely effect of
the debt management option on his credit rating (including whether (and how
long) it will show up on his credit report, and that he might not be able to obtain
credit in the short and/or medium-to long-term either) as an example of an
“unfair or improper business practice”.

15.
The Authority considers that the rules in CONC 8.3 are of particular importance

because they are designed to ensure that consumers have sufficiently clear
information regarding the costs and consequences of entering into a particular debt
solution, so as to enable them to make an informed decision.

16.
Ms Stuart produced revised pre-contractual documentation which largely

addressed the concerns set out at paragraph 14 above, although it contained
conflicting information regarding fees, indicating a lack of care in its preparation. It
was also defective in other respects: it contained advice on the debt solution
recommended, but failed to contain the matters required by CONC 8.3.4(3)(a) and
(b), namely a warning of the consequences of failing to pay taxes, fines and certain
other specified payments, and of the actual or potential consequences of not
continuing to make repayments under credit agreements or consumer hire
agreements. It was also at odds with the fact that, at the same time as providing
some of this documentation, Ms Stuart stated her intention not to take on new
customers; in inadequately rectifying documentation of fundamental importance to
consumers, while indicating that it would not in fact be used, the Authority considers
that Ms Stuart exhibited a reactive approach to dealing with issues raised by the
Authority rather than addressing the need to ensure ongoing compliance in relation
to her business.

Call script

17.
Having reviewed Ms Stuart’s sales call script (received by the Authority on 4

February 2015), the Authority considers that calls conducted in accordance with this
document would not meet the Authority’s regulatory requirements, for the following
reasons:

(a) The script asked five initial questions which appeared to have been designed to

screen out those debtors who were ineligible for a debt management plan or an
IVA. Depending on the answers given, the call script then directed the
employee to either proceed to gather income and expenditure information, or to
terminate the call. The Authority considers that the termination option was non-
compliant with the rule in CONC 8.3.7(3). This requirement was derived from
paragraph 3.23g of the OFT Guidance, which cited failing to refer a consumer
(where appropriate) to a not-for-profit advice organisation where the customer:

(1) has priority debt problems and/or an immediate ‘emergency’

that the licensee is unable or unwilling to assist with and/or;

(2) does not have enough disposable income to meet the cost of

paying the fees charged by the licensee

as an example of an “unfair or improper business practice”.

(b) Calls conducted in accordance with the call script would be non-compliant with

CONC 8.3.2(1), having regard to the guidance in CONC 8.3.3, by virtue of the
fact that it failed to require a sufficiently full assessment of the financial
circumstances of the customer – notably in relation to the absence of any
questions in relation to the country within the UK in which the customer was
resident. This requirement was derived from paragraph 2.6 of the OFT
Guidance, which stated:

“Licensees must act honestly and treat consumers fairly. They should
ensure that:

a. all advice given and action taken has regard to the best

interests of the consumer

c. reasonable care is taken to provide accurate information

when dealing with (including advertising to) consumers
from different countries in the UK, due to the differences
in law, court procedures, possible enforcement actions,
and the debt management options available to the
consumer, in the different jurisdictions.”

Having regard to the guidance in CONC 8.2.2, the Authority considers this was
also a breach of Principle 2.

18.
Ms Stuart introduced amended call scripts following correspondence on this issue

with the Authority’s Authorisations Division. However, Ms Stuart failed to identify the
inadequacy of the call script of her own accord.

Record-keeping

19.
Following a review of a sample of 20 of Ms Stuart’s client files by the Authority,

the Authority is not satisfied that Ms Stuart has in place adequate record keeping
procedures in relation to the following matters:

(a)
Her compliance with the requirement under CONC 8.4.1 that a firm has in
place written contracts with its clients dealing with the various matters set
out in CONC 8.4.2. None of the files sampled contained any evidence of
this;

(b)
Her compliance with the pre-contractual information requirements under
CONC 8.3. None of the files sampled contained any evidence of sufficient
information about the options identified as suitable, or why these were
considered suitable and other options unsuitable. Although many of these
files related to customers who were part of the book of business
purchased by Ms Stuart (so that it was not Ms Stuart or her advisers who
entered into the initial arrangements with these customers), the sample
included four files relating to other customers;

(c)
Her compliance with the monitoring and review obligations under CONC
8.8.1, including the obligation to provide an annual statement to
customers under CONC 8.8.1(8), dealing with the various matters set out
in that provision. Only one of the files sampled contained any evidence of
an income and expenditure check being carried out, and none contained
any evidence of an annual statement having been provided; and

(d)
The suitability of debt advice given to customers. For example, the
Authority requested (by way of a sample) copies of call notes and
correspondence for any customers for whom a debt management plan was
set up during a particular week in November 2014, and Ms Stuart provided
the notes for the only such customer. The notes were not sufficient to
demonstrate that the quality and thoroughness of the adviser’s
assessment of the customer’s income and expenditure were adequate;
also, the notes contained no record of why the debt management plan
recommended was suitable.

20.
Ms Stuart produced an annual statement template which she stated is sent to

clients. However, Ms Stuart did not provide any evidence of this template having
been used in practice, and it does not comply with the detailed requirements of
CONC 8.8.1, as it contains only single monthly figures for: payments made by the
customer; fees paid to Ms Stuart; and the amount paid to creditors as a whole,
together with an annual total for the same sums.


21.
The Authority is not satisfied that Ms Stuart’s record keeping is compliant with

either SYSC 9.1 or CONC 8.8.1(9) and considers that Ms Stuart’s records are wholly
insufficient to enable the FCA to determine the extent to which Ms Stuart has
complied with the requirements under the regulatory system.

22.
CONC 8.8.1(9) was derived from paragraph 3.45i of the OFT Guidance, which

cited the failure to maintain adequate records (for example, copies of correspondence
and statements of account) relating to each debt management plan, until such time
as the contract between the consumer and the licensee was completed or
terminated, as an example of an “unfair or improper business practice”.

23.
As noted above, the relevant Authority requirements in CONC in relation to the

matters set out in paragraphs 14-22 above were transposed or derived from
guidance issued under the previous consumer credit licensing regime, regulated by
the OFT; the Authority considers this exacerbates Ms Stuart’s failure to follow the
rules in CONC, as similar provisions had been applicable to her for a number of
years.

Quality assurance

24.
Ms Stuart stated that she had put in place quality assurance checks consisting of

call monitoring assessments conducted by her office manager, which entailed a
review of the advice given by advisers to ensure that it was compliant. She provided
the Authority with a checklist; however, she did not provide any examples of
completed checklists which had been used.

25.
Ms Stuart provided the Authority with copies of notes made during a call

assurance process for two customers during November 2014. However, the notes
were not sufficiently detailed to demonstrate whether the customer received
compliant advice: for example, it was not clear which debt solutions the adviser had
recommended or why; nor was it clear whether the adviser had provided sufficient
detail about the available solutions for the customer to be able to make an informed
decision.

26.
The Authority is not satisfied that Ms Stuart had, or has, the non-financial

resources required to take the steps required to put in place adequate quality
assurance checks of advice given by her staff to customers.

Compliance assistance and approach

27.
Ms Stuart has engaged compliance assistance from an external firm in relation to

the application for Part 4A permission, and to address certain issues raised by the
Authority in the course of considering the application. Ms Stuart has also expressed
a willingness to address any remaining concerns. However, in these respects, she
has adopted a reactive approach to dealing with issues raised by the Authority rather
than addressing the need to ensure ongoing compliance in relation to all aspects of
her business.

IMPACT ON THE THRESHOLD CONDITIONS

28.
The Authority considers that, having regard to all the circumstances, it cannot be

satisfied that Ms Stuart will satisfy, and will continue to satisfy, the Threshold
Conditions.

29.
In relation to the Threshold Condition set out in paragraph 2D of Schedule 6 to

the Act, the Authority is not satisfied that Ms Stuart has appropriate non-financial
resources in relation to the regulated activities that she seeks to carry on, for the
following reasons:

(a) Ms Stuart has repeatedly demonstrated an apparent lack of understanding

of and/or compliance with the relevant requirements of the regulatory
system as it applies to her business. Many of the express rules of CONC
which apply to Ms Stuart were transposed from guidance under the previous
consumer credit licensing regime, regulated by the OFT. The Authority
therefore considers that this exacerbates Ms Stuart’s failure to understand
or follow the rules in CONC, as similar provisions had been applicable to her
for a number of years.

(b) Ms Stuart has not been able to demonstrate that her systems and controls

are adequate to ensure that she is compliant with the requirements of the
regulatory system. The Authority is particularly concerned that Ms Stuart’s
record keeping systems are insufficient to enable the Regulator to monitor
her compliance with the requirements under the regulatory system, and to
ascertain that she has complied with all obligations with respect to clients.

(c) Ms Stuart has not been able to demonstrate that she is ready, willing and

organised to carry out adequate internal quality assurance checks of debt
advice given to consumers by her employees.

30.
Ms Stuart has made certain amendments to her documentation and processes

following dialogue with the Authority in relation to them, and has engaged
compliance assistance from an external firm in relation to the application for Part 4A
permission, and to address certain issues raised by the Authority in the course of
considering the application. However, the Authority is not satisfied that Ms Stuart
personally has the competence, or has other human resources, to ensure that she
can comply with the requirements imposed on her, or likely to be imposed on her, by
the Authority from time to time. She has adopted a reactive approach to dealing with
issues raised by the Authority rather than ensuring she has the resources to be able
to identify relevant issues and take the steps necessary to ensure ongoing
compliance in relation to all aspects of her business.

31.
On the basis of the facts and matters described above, the Authority has

concluded that Ms Stuart will not satisfy, and continue to satisfy, the threshold
conditions in relation to all of the regulated activities for which Ms Stuart would have
permission if the application was granted.

IMPORTANT NOTICES

32. This Final Notice is given under section 390 (1) of the Act.

33. Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of

information about the matter to which this Notice relates. Under those provisions,
the Authority must publish such information about the matter to which this Notice
relates as the Authority considers appropriate. The information may be published
in such manner as the Authority considers appropriate. However, the Authority
may not publish information if such publication would, in the opinion of the
Authority, be unfair to you or prejudicial to the interests of consumers or
detrimental to the stability of the UK financial system.

34. The Authority intends to publish such information about the matter to which this

Final Notice relates as it considers appropriate.

Authority contacts

1. For more information concerning this matter generally, contact Fiona Mackinnon-

Miller, Manager, Credit Authorisations Division at the Authority (direct line: 020
7066 6367 / email: Fiona.Mackinnon-Miller@fca.org.uk).

Chair of the Regulatory Transactions Committee

ANNEX A – REGULATORY PROVISIONS RELEVANT TO THIS FINAL NOTICE

1. Section 55A(1) of the Act provides for an application for permission to carry on

one or more regulated activities to be made to the appropriate regulator. Section
55A(2) defines the “appropriate regulator” for different applications.

2. Section 55B(3) of the Act provides that, in giving or varying permission, imposing

or varying a requirement, or giving consent, under any provision of Part 4A of the
Act, each regulator must ensure that the person concerned will satisfy, and
continue to satisfy, in relation to all of the regulated activities for which the
person has or will have permission, the threshold conditions for which that
regulator is responsible.

3. These threshold conditions are set out in schedule 6 of the Act. In brief, the

threshold conditions relate to:

(1)
Location of offices: paragraph 2B

(2)
Effective supervision: paragraph 2C

(3)
Appropriate resources: paragraph 2D

(4)
Suitability: paragraph 2E

(5)
Business model: paragraph 2F

Relevant provisions of the Authority’s Handbook

The Principles

4. Principle 2 provides: “A firm must conduct its business with due skill, care and

diligence”.

COND

Appropriate Resources (Paragraph 2D of Schedule 6 to the Act)

5. COND 1.3.2G(2) states that, in relation to threshold conditions 2D to 2F, the

Authority will consider whether a firm is ready, willing and organised to comply
on a continuing basis with the requirements and standards under the regulatory
system which will apply to the firm if it is granted Part 4A permission.

6. COND 2.4.1A reproduces paragraph 2D.

7. COND 2.4 1A(1) provides; “The resources of A must be appropriate in relation to

the regulated activities which A carries on or seeks to carry on.”

8. COND 2.4.1A(2) provides: “The matters which are relevant in determining

whether A has appropriate resources include –

(a) the nature and scale of the business carried on, or to be carried on, by A;

(b) the risks to the continuity of the services provided by, or to be provided by,

9. COND 2.4.1.A(4) provides: “The matters which are relevant in determining

whether A has appropriate non-financial resources include-

(a) the skills and experience of those who manage A’s affairs;

(b) whether A’s non-financial resources are sufficient to enable it to comply with

–

(i) requirements imposed or likely to be imposed on A by the

Authority in the course of the exercise of its functions;

(ii) any other requirement in relation to whose contravention the

Authority would be the appropriate regulator for the purposes of
any provision of Part 14 of the Act.”

10. COND 2.4.2G(2) states that the Authority will interpret the term 'appropriate' as

meaning sufficient in terms of quantity, quality and availability, and 'resources' as
including all financial resources (though only in the case of firms not carrying on,
or seeking to carry on, a PRA-regulated activity), non-financial resources and
means of managing its resources; for example, capital, provisions against
liabilities, holdings of or access to cash and other liquid assets, human resources
and effective means by which to manage risks.

11. COND 2.4.4G states that, when assessing whether a firm has appropriate

resources, the Authority will have regard to various matters including:

“(d) whether the firm has taken reasonable steps to identify and measure any
risks of regulatory concern that it may encounter in conducting its business and
has installed appropriate systems and controls and appointed appropriate human
resources to measure them prudently at all times.”

CONC

12. CONC 8.2.2(1) states: “One aspect of conducting a firm’s business with due skill,

care and diligence under Principle 2 is that a firm should ensure that it gives
appropriate advice to customers residing in the different countries of the UK. A
failure to pay proper regard to the differences in options for debt solutions
available to those customers and to the differences in enforcement actions and
procedures is likely to contravene Principle 2 and may contravene other
Principles”.

“A firm must ensure that:

(1) all advice given and action taken by the firm or its agent or its appointed
representative:

(a) has regard to the best interests of the customer;

(b) is appropriate to the individual circumstances of the customer; and

(c) is based on a sufficiently full assessment of the financial circumstances of
the customer”.

14. CONC 8.3.3G states: “The individual circumstances of the customer include, for

example, the customer's financial position, the country in the UK to whose laws
and procedures the customer and the lender in question are subject, and the
level of understanding of the customer.”

15. CONC 8.3.4R states:

“A firm must ensure that advice provided to a customer, whether before the firm
has entered into contract with the customer or after, is provided in a durable
medium and:

(1) makes clear which debts will be included in any debt solution and which debts
will be excluded from any debt solution;

(2) makes clear the actual or potential advantages, disadvantages, costs and
risks of each option available to the customer, with any conditions that apply for
entry into each option and which debts may be covered by each option;

(3) warns the customer:

(a) of the actual or potential consequences of failing to continue to pay
taxes, fines, child support payments and debts which could result in loss of
access to essential goods or services or repossession of, or eviction from,
the customer's home;

(b) of the actual or potential consequences of not continuing to make
repayments under credit agreements or consumer hire agreements;

(c) of the actual or potential consequences of ignoring correspondence or
other contact from lenders and those acting on behalf of lenders;

(d) that action to recover debts may be commenced, which may involve
further cost to the customer; and

(e) that by entering into a debt management plan or another non-
statutory repayment plan there is no guarantee that any current recovery
or legal action will be suspended or withdrawn;

(4) where relevant to the debt solution, makes clear the risks, including the
following risks:

(a) if the arrangement or deed fails, the risk of bankruptcy;

(b) homeowners may need to release equity from the value of their homes
to pay off debts; and that a remortgage may attract higher interest rates
or that if no remortgage is available, an individual voluntary arrangement
may be extended for 12 months;

(c) there are restrictions on the expenditure of a person who enters into an
individual voluntary arrangement or protected trust deed;

(d) the customer's lenders may not approve the individual voluntary
arrangement or protected trust deed; and

(e) only unsecured debts included within the individual voluntary
arrangement or protected trust deed may be discharged at the end of the
period and unsecured debts not included remain outstanding”.

16. CONC 8.3.7R states: “A firm must:

(3) refer a customer to an appropriate not-for-profit debt advice body in
circumstances where the customer:

(a) has problems related to debt requiring immediate attention with which
the firm is unable or unwilling to assist the customer; or

(b) does not have enough disposable income to pay the firm's fees.”

17. CONC 8.4.1R states “A firm must provide a customer with a written contract

setting out its terms and conditions for the provision of its services.” CONC
8.4.2R requires the contract to “include…the following matters:

(1) the nature of the service to be provided by the firm, including the specific

debt solution to be offered to the customer;

(2) the duration of the contract;

(3) the total cost of the firm’s service or, where it is not possible to state the

total cost, the formula the firm uses for calculating its fees or charges or
an estimate of the anticipated likely total cost…

(4) the circumstances in which a customer may terminate the contract and

receive a refund in accordance with relevant law and any fees or charges
the customer may be required to pay in that case; and

(5) …the duration and conditions for exercising any right to cancel that may

apply and any fees or charges the customer may be required to pay.”

18. CONC 8.8.1R states:

“A firm in relation to a customer with whom it has entered into a debt
management plan must:

(8) provide a statement to the customer at the start of the debt management
plan, and at least annually or at the customer's reasonable request, setting out:

(a) a balance showing the amount owed by the customer, including any interest
charges at the beginning of the statement period;

(b) fees, charges and other costs applied over the period of the statement,
including any upfront fee or deposit, such as an initial arrangement fee, an
arrangement fee, any periodic or management or administrative fee, any
cancellation fee and any other costs incurred under the contract;

(c) a narrative explaining the type of fee applied, how the fee is calculated and to

what it applies;

(d) the duration or estimated duration of the contract;

(e) the total cost of the firm's service over the duration or estimated duration of

the contract; and

(f) monthly or other periodic payments made to lenders;

(9) maintain adequate records relating to each debt management plan which the

firm has administered for the customer until the contract between the
customer and the firm is completed or terminated”.

SYSC

19. SYSC 9.1.1R states:

“A firm must arrange for orderly records to be kept of its business and
internal organisation, including all services and transactions undertaken by it,
which must be sufficient to enable the appropriate regulator… to monitor the
firm's compliance with the requirements under the regulatory system, and in
particular to ascertain that the firm has complied with all obligations with
respect to clients.”