"They showed complete disregard for the consequences of their actions and we have taken the strongest action possible in preventing them from operating in financial services again"
The firm’s customers are unable to recover their money as these losses are not covered by the FSCS, and as such were left with continuing debts.
The Whitehursts ran First Step Finance from 2007 to 2013, until the OFT revoked its licence over "deceitful, oppressive, improper and unfair business practices".
An investigation found that First Step’s clients were largely vulnerable individuals who went to the firm for help to pay off their debts. The firm told customers that it would build a ‘pot’ of money for each customer and that it would use this ‘pot’ to make a full and final settlement of their debts with the customer’s creditors.
However, the Whitehursts in fact used clients’ money to fund their businesses and a luxurious lifestyle. They spent over £500,000 on holidays, bars and restaurants, including stays at five-star luxury hotels, and over £200,000 on luxury cars.
Over £1m of cash was also transferred to Mr Whitehurst for his personal use. In addition, over £1m of client money was used for the benefit of firms associated with the Whitehursts and over £2.2m of client money was used to fund First Step’s expenses.
The FCA took over the regulation of consumer credit in April 2014 and has now banned the Whitehursts from any involvement in regulated financial services activity. The FCA has also referred the Whitehursts to the City of London Police.
The FCA says the bank imposed is the strongest sanction available in this case, as the Whitehursts’ conduct took place before the responsibility for regulation of consumer credit was transferred to the regulator.
To date, no firm operating the ‘full and final settlement’ model used by First Step has been authorised by the FCA.
Mark Steward, Executive Director of Enforcement and Market Oversight, said: “The Whitehursts were trusted by their customers, who were extremely vulnerable, to help them with their debt problems. They abused this trust, living a luxury lifestyle at the expense of people who could not afford to lose their money.
"They showed complete disregard for the consequences of their actions and we have taken the strongest action possible in preventing them from operating in financial services again.”
