FINAL NOTICE

ACTION

1. For the reasons given in this notice, the Authority has refused the Application
made by Managed Debt Services Limited (‘MDSL’) for authorisation to carry on
the regulated activities of debt adjusting and debt counselling.

SUMMARY

2. On 7 June 2012 MDSL applied to the OFT for a consumer credit licence covering
the activities of debt adjusting and debt-counselling, both on a commercial basis.
By way of the OFT’s determination dated 27 March 2014 the OFT decided to
refuse that Application.

3. As at 1 April 2014 statutory responsibility for consumer credit regulation
transferred from the OFT to the Authority. In accordance with the Transitional
Order, the OFT’s determination notice is to be treated as a decision notice given
by the Authority under section 55X(4) the Act.

4. MDSL has not referred the matter to which the Decision Notice relates to the
Tribunal.

5. The Authority cannot be satisfied that MDSL is fit to be authorised under Part 4A
of the Act to carry on the regulated activities to which the Application relates for
the following reasons:

(a) MDSL has failed to demonstrate that it, or its individuals, has sufficient
skills, knowledge and experience in the areas in which it seeks to carry out
regulated activities.

(b) MDS failed to provide clear and accurate information, explanations and
advice in respect of its products and services. MDSL’s marketing,
advertising and promotional materials failed to accurately reflect the
services offered by MDSL and the cost of those services. MDSL also
misused the OFT’s name in its advertising materials.

(c) MDSL does not have adequate policies and procedures to ensure that its
marketing practices are transparent and not misleading to consumers.
MDSL failed to provide adequate pre-contract information in respect of its
Debt Settlement Plan. It also failed to have any pre-contract information in
respect of its Debt Management Plan, therefore creating a risk of
consumer detriment.

6. MDSL intended to operate in an industry where consumers affected are often
particularly vulnerable. The risk of long term detriment to vulnerable consumers
is amplified where a business of this type fails to meet the required regulatory
standards. MDSL’s failure to demonstrate that it had individuals with the relevant
skills and experience, as well as its failure to implement adequate procedures,
made clear that authorising MDSL would present an unacceptable risk to
consumers.

DEFINITIONS

7. The definitions below are used in this Final Notice.

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

“the Application” means MDSL’s application to the OFT for a consumer credit
licence dated 7 June 2012

“the Authority” means the body corporate previously known as the Financial
Services Authority and renamed on 1 April 2013 as the Financial Conduct
Authority

“the Decision Notice” means the OFT determination notice dated 27 March 2014

“MDSL” means the applicant, Managed Debt Services Limited

The “OFT” means the body that before 1 April 2014 was known as The Office Of
Fair Trading

“the Transitional Order” means The Financial Services and Markets Act 2000
(Regulated Activities) (Amendment) (No.2) Order 2013

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

“the Warning Notice” means the OFT minded to refuse notice dated 22 November
2013

REASONS AND IMPACT ON FITNESS

8. The regulatory and statutory provisions relevant to this final notice are referred to
in Annex A.

9. MDSL’s personnel lack relevant experience. Despite MDSL’s stated future reliance
upon external professional assistance and third party support, there are
deficiencies in the collective experience of the firm. One of the individuals in
MDSL has sought to undertake training during the period of the application
process. However, he did not finish this training during that period. Of the two
other individuals, one remains abroad and the other has limited relevant
experience.

10. MDSL has not satisfied the Authority that it has adequate resources, having
regard to the nature of the regulated activity it seeks to carry on and the
available skills, experience and resources of the firm. This is evidenced by the
failures in the pre-contract information and other documentation to meet with
legislative and regulatory requirements.

11. MDSL has not satisfied the Authority that it has adequate practices and
procedures in place that are suitable to enable it to carry on the regulated
activities that it seeks permission to conduct. In particular the firm does not
incorporate adequate practices and procedures to meet the needs of consumers
or mitigate the risks posed to them. This is evidenced by the following:

(a) MDSL made a misleading statement with regard to offering free debt
advice. Whilst MDSL did not propose to charge for initial advice, the debt
management services and products it proposed to provide did attract fees;

(b) MDSL emphasised the potential savings of debt management without
making it equally clear that creditors are not obliged to agree to a debt
management plan or freeze interest and charges. This is because
rescheduling debts will usually lead to an increase in the total sum being
repaid, an extended repayment period and a possible impact on the
consumer’s credit rating;

(c) MDSL claimed or implied that the consumer would definitely be debt free
within a specified period of time;

(d) MDSL failed to provide warnings regarding debt management options by
providing unbalanced information with regard to characteristics and keys
risks associated with the debt management option;

(e) MDSL failed to provide clear and adequate information in its websites,
advertising content and pre-contract information about fees and costs
associated with the service that they were to provide; and

(f) MDSL failed to provide sufficiently adequate pre-contract information
regarding debt management plans and debt settlement plans, such as the
nature of the service to be offered, its duration, projected cost and the
likely consequences for the consumer’s credit rating.

12. MDSL misused the OFT’s name in its advertising material to imply that the whole
range of its activities were licenced or approved in some way, including the
entirety of its business processes.

IMPORTANT NOTICES

13. This final notice is given under section 390(1) of the Act.

14. 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.

15. The Authority intends to publish such information about the matter to which this
Final Notice relates as it considers appropriate.

Authority contacts

For more information concerning this matter generally, contact Keith Cooper,
Manager, Debt, Credit & Regulatory Permissions Department at the Authority (direct
line: 020 7066 7466 / email: keith.cooper@fca.org.uk).

Nicholas Mears
Head of Department
Authorisations Division
The Financial Conduct Authority

ANNEX A – REGULATORY PROVISIONS RELEVANT TO THIS WARNING NOTICE

1.
The OFT was required, by section 25 of the CCA, which section was also repealed
by the Transitional Order with effect from 1 April 2014, to be satisfied, before
issuing a consumer credit licence of the type applied for by MDSL, that the
applicant was fit to hold it, having regard, among other factors, to whether any of
the applicant’s agents, associates and/or controllers had committed any offence
involving fraud and/or had contravened the CCA itself.

2.
The Authority is required, by section 55B(3) of the Act, before giving permission
under Part 4A of the Act to any person, to ensure that that person will satisfy and
continue to satisfy, in relation to all of the regulated activities for which the
person will have permission, the relevant threshold conditions set out in Schedule
6 to the Act.

3.
Paragraph 2E of Schedule 6 to the Act requires, specifically, as one of those
conditions, that the Authority should ensure that each such applicant is fit and
proper.

4.
Paragraph 2E further provides that the Authority is to consider in this regard:

(1)
the applicant’s connections with other persons;

(2)
the need to ensure that the applicant’s affairs are conducted in an
appropriate manner, having regard in particular to the interests of
consumers and the integrity of the UK financial system;

(3)
whether the applicant has complied with requirements imposed by the
Authority, or requests made by the Authority, relating to the provision of
information to the Authority;

(4)
whether those who manage the applicant’s affairs have acted and may be
expected to act with probity; and

(5)
the need to minimise the extent to which it is possible for the business
carried on or to be carried on by the applicant to be used for a purpose
connected with financial crime.

Relevant provisions of the Transitional Order

5. Article 32 of the Transitional Order provides as follows:

“(1) Paragraphs (2) to (4) apply if, before 1st April 2014—

(a)
the OFT had given a notice to a person (“A”) of its determination to

refuse to issue a standard licence to A in accordance with A’s

application, and

(b)
the appeal period in relation to that decision had not ended.

(2) The notice is to be treated as—

(a)
if A does not have a Part 4A permission, a decision notice given

under section 55X(4) of the Act by the FCA to A of the decision to

refuse A’s application for Part 4A permission;

(b)
in any other case, a decision notice given under section 55X(4) of the

Act of the decision of the appropriate regulator to refuse A’s

application to vary A’s Part 4A permission.”

Relevant provisions of the Authority’s Handbook

6. In exercising its powers in relation to the granting of a Part 4A permission, the
Authority must have regard to guidance published in the Authority Handbook,
including the part titled Threshold Conditions (“COND”). The considerations in
relation to the decision made in respect of MDSL’S application are set out below.

Threshold condition 2D: Appropriate Resources

7. 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.

8. COND 2.4.2G(2) states that the FCA 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.

9. COND 2.4.4G states that, when assessing whether a firm has appropriate
resources, the Authority will have regard to matters including:

(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, A

Threshold condition 2E: Suitability

10. COND 2.5.2G(2) states that the FCA will also take into consideration anything
that could influence a firm's continuing ability to satisfy the threshold conditions
set out in paragraphs 2E and 3D of Schedule 6 to the Act. Examples include the
firm's plans to seek to vary its Part 4A permission to carry on additional regulated
activities once it has been granted that permission.

11. COND 1.3.3BG provides that, in determining whether the firm will satisfy, and
continue to satisfy, the FCA threshold conditions, the FCA will have regard to all
relevant matters, whether arising in the United Kingdom or elsewhere.