FCA bans debt management director over £7m consumer loss

" First Step was meant to help people manage their debts, but Mr Newton’s actions put them one step backwards and in a worse position than before."

Newton used customers' money to purchase debt management firm, First Step Finance and was the sole director between October 2013 and May 2014.

He purchased the firm from Adrian and Christine Whitehurst, who have already been banned by the FCA, and allowed £322,500 to be transferred from the First Step accounts to Mrs Whitehurst.

The Whitehursts ran First Step Finance from 2007 to 2013, until the OFT revoked its licence over "deceitful, oppressive, improper and unfair business practices".

The FCA says Newton knew the money from First Step should only have been used to pay customers’ creditors or to be returned to customers and knew the firm had a significant client money shortfall in its accounts of over £6 million.

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 used clients’ money to fund their businesses and a luxurious lifestyle, spending over £500,000 on holidays, bars and restaurants 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 firm went into administration on 28 May 2014 with a shortfall of £7,156,036 from over 4,000 customers. Customers are not able to recover compensation for their losses from the Financial Services Compensation Scheme.

Mark Steward, executive director of enforcement at the FCA, said: "Mr Newton blatantly used customers’ money to fund the purchase of First Step from Christine Whitehurst. This was dishonest and showed a complete lack of integrity. First Step was meant to help people manage their debts, but Mr Newton’s actions put them one step backwards and in a worse position than before.

"He is not a fit and proper person and poses a serious risk to consumers. This is the strongest action we can take and will prevent him from operating in financial services again."