Client money missing at Stockport debt manager

A STOCKPORT debt management firm that folded last month had a £7.2m hole in its client account.

Administrators from Begbies Traynor in Manchester were appointed to Debt Help & Advice and its sister companies First Step Finance and Primary Business Solutions in early June.

It has now emerged that there is no cash left in the business including all the money that was paid into debt management plans by some 3,500 clients. Begbies said the money had not been held in a separate account which means it would have become mixed up with the business’ own working capital.

Administrator Paul Stanley told TheBusinessdesk.com £7.2m was showing as the balance of client money in the books but there was no money left, and “no realistic prospect of the clients getting any of their money back”.

It follows last year’s failure of Sale-based Smooth Financial which collapsed having lost around £800,000 of client money. Administrators in that case said the money had been used to keep the business going. Debt management firms tend to take a cut of any debt reduction they negotiate with creditors, then charge a fee for administering repayments.

The Debt Help & Advice businesses stopped trading abruptly with the loss of 80 jobs last month and the Financial Conduct Authority, which regulates the sector, warned customers to stop making payments.

Begbies has now agreed a deal to sell the client list to another Stockport debt manager, Hobart Revenue Management Limited, trading as Platinum Management, which is owned by Syed Ali and Jason McClean.

A letter from Begbies to clients which has been posted on Platinum’s website states: “It is now clear that on appointment only minimal funds were remaining in any of the companies’ bank accounts and that client monies had not been held in a separate account.”

It added that no client money was being transferred to Platinum as part of the deal and was continuing to investigate the group’s cash position.

“It should be noted that there is likely to be a 100% shortfall between the amount of funds paid in by clients and the current cash position of the companies.”

Debt Help was set up in October by Darren Newton who acquired First Step Finance’s client base from Christine Whitehurst after the previous regulator, the Office of Fair Trading, revoked its consumer credit licence over “serious concerns about the transparency and integrity of its practices”.

Mr Newton was a former financial controller at First Step and was joined by another member of the management, Adrian Crymble.