PPI climbdown pushes Wilmslow Financial into administration

WILMSLOW Financial Services, the finance company handling a backlog of PPI cases lodged against its former Freedom Finance loan broking business, has been placed into administration.

Phil Duffy and Sarah Bell from the Manchester office of insolvency firm MCR have been appointed as joint administrators of the company, which ceased to offer new loans last year and sold its loan broking business.

It had since been managing the wave of claims lodged against it from former clients who had taken out Payment Protection Insurance (PPI) alongside loans.

Duffy said that the company’s shareholders were forced to call in administrators after the British Banking Association and several major banks recently announced they would no longer continue to fight a “super complaint” brought against them by Citizens Advice for mis-selling PPI insurance alongside loans.

He said that shareholders felt they had no choice but to seek administration as Wilmslow Financial Services’ potential liabilities were likely to considerably outweigh remaining assets.

Wilmslow Financial Services was majority owned by US private equity firm JZ International, which bought a 55% stake in the company in 2000.

Under the ownership of entrepreneur Rupert Webb, the Freedom Finance business prospered during the early part of the last decade and reached turnover of £45m in 2006 – the year in which it sold its Freedom Lending mortgage broking division to Merrill Lynch for a reported £20m.

However, it latterly faced problems selling secured loans as the credit crunch hit and its loan broking business and assets were sold to another JZ International business, Moneio, for £800,000 last year.

Moneio continues to operate a loan broking business under the Freedom Finance brand and is unaffected by Wilmslow Financial Services’ administration.

Mr Duffy said that the loans and mortgages which the company had previously sold had often been bundled with a PPI policy, which means that it is now facing a substantial amount of claims – “somewhere between 15,000 and 16,000”.

He added that he currently had no idea of the potential scale of the liabilities faced by the company, but said that it was already working on a plan with financial watchdogs including the Financial Services Authority (FSA) and the Financial Services Compensation Scheme (FSCS) on compensating former clients.

In many cases, the level of compensation owed to former customers is likely to be several times the amount that Wilmslow Financial initially received in commission for selling PPI policies.

The Financial Services Compensation Scheme has issued a statement saying it “is aware that Wilmslow Financial Services Ltd has been put into administration”.

It said that it was investigating how it could help those with claims against the company but said there was no need for claimants to contact them.

“We will publish an update on Wilmslow Financial Services as soon as more information is available,” it said.

Under its compensation scheme, customers are likely to be able to reclaim 90% of any policy money owed to them with no upper limit on the size of claim.