New crisis for stricken lender as FCA casts doubt on vital Scheme of Arrangement

The regulatory body charged with keeping financial firms in check has expressed its concern over how stricken sub-prime lender Morses Club will be able to fund a plan that it hopes will secure its future as a viable business.

Nottingham-based Morses Club, which also has operations in West Yorkshire, was in court this week to seek the views of the court before proceeding to the next stage in the Scheme of Arrangement process.

Last year, Morses Club issued repeated warnings that it could enter insolvency unless it brings forward a Scheme of Arrangement after it suspended processing claims made against its “unaffordable” loans.

However, the Financial Conduct Authority (FCA) has been less them impressed with the Scheme. It submitted a letter to the firm and the court ahead of the hearing, as it has “a number of concerns” with the firm’s proposals.

The FCA has concerns about the uncertainty of the funding that would be needed for the scheme, the methodology for identifying customers owed compensation and that consumers could be worse off as result of the scheme.

In the letter, the FCA says: “There is a substantial risk that the funding will not materialise – and it will only be after a substantial time period that it will become clear whether or not the funding will materialise – which makes this Scheme one which is highly unusual and highly uncertain in terms of its impact.”

The letter added: “At present, the FCA considers it highly speculative that the Scheme would produce a better outcome for the Scheme creditors than an immediate administration [of Morses Club].”

A statement from the FCA said: “Morses Club has said they will look into these concerns and consider whether improvements can be made ahead of the sanction hearing. We will assess the updated proposal in due course.”

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