Customers of Azures v FCA v Barclays Partner Finance ( 1 August 2018 )

[Amethyst]

Interesting Tribunal ruling regarding an unauthorised broker signed customers up to loans ( debtor - creditor - supplier ) with Barclays Partner Finance and the FCA issuing a validation order which determined BPF were not at fault and theyy could keep the money paid on the agreements .... because the FCA had failed to consider consumer detriment.... so the FCA has to reconsider it's decision

https://www.bailii.org/uk/cases/UKUT/TCC/2018/258.pdf

BPF informed the Authority that the

Regulated Agreements were brokered by an unauthorised broker within Azure known

as Azure Services Limited (“the Broker”) in breach of the general prohibition set out

in s 19 FSMA against persons carrying on regulated activities in the United Kingdom

without authorisation by the Authority or an applicable exemption from authorisation

applying.

FINANCIAL SERVICES – consumer credit agreements entered into

through the intermediation of an unauthorised broker - whether decision of

the Authority to validate the agreements reasonably open to the Authority-

no - references allowed and remitted to the Authority for it to reconsider its

decision - ss 28A and 133 (6) and (6A) FSMA

[Amethyst]

Press - http://wwwt.timesharetalk.co.uk/index.php?topic=20369

Landmark Ruling On Consumer Detriment Against Bank Loans Referred By Unregulated Broker For Timeshare Purchases

A decision in the Royal Courts of Justice brings fresh hope to thousands of timeshare holders in the UK.

A judge has ruled that “detriment to consumers” must be taken into consideration in making a decision whose parent company is Barclays Bank plc - affecting 1,444 regulated credit agreements worth £47million.

The appeal in the Upper Tribunal of the RCJ was referred after a decision for a Validation Order by the Financial Conduct Authority was referenced (appealed) by 45 timeshare holders.

A spokesperson at M1 Legal - "This is a landmark ruling that could open up the floodgates.

Sitting at the Upper Tribunal, Judge Timothy Herrington was asked to remit the Validation Order granted in favour of BPF back to the FCA - after it was opposed by the 45 borrowers, who asked that it be reconsidered.

The agreements financed the acquisition of timeshare accommodation from a group of companies called Azure, involving 1,444 consumer credit agreements totaling £47million. The agreements were brokered by an unauthorised broker which was in breach of the Financial Services and Markets Act 2000.

Those agreements were therefore rendered unenforceable unless a Validation Order was issued by the FCA, and so the borrowers were entitled to recover their money or property.

BPF applied to the FCA in May 2017 for them to consider issuing a Validation Order in respect of loans referred by an unauthorised broker for the period between 1st April 2014 and 24th April 2016.

In February 2018 the FCA issued the Validation Order, which would allow BPF to retain any money paid to them under the agreements. This was on the basis that BPF did not intentionally contravene the requirements. BPF argued the effects on borrowers would have been no different even if the broker had been authorised. They said they were not aware of the re-structure within the companies of the Azure group and the company that was referring the loans and they had since introduced training to prevent a reoccurrence.

The borrowers submitted to the Tribunal a series of allegations including that they had been pressurised into signing, false representations were made regarding the purchases and the loans, they had been misled, as well as concerns about the agreements and credit assessments.

At the time of the FCA issuing the Validation Order, BPF had not submitted evidence to them with regards to consumer detriment, and the FCA reasonably assumed that they had received all evidence required to issue the Validation Order. It was only once appeals were received by the Upper Tribunal in opposition to the Validation Order that the FCA became aware of the issue of consumer detriment.

The FCA and the borrowers who appealed the decision then asked the Tribunal to remit the matter back to the FCA to reconsider the Validation Order with a direction to take consumer detriment into consideration.

BPF contested that the fact that the broker was unauthorised had no detrimental effect on consumers and said the Validation Order shouldn’t be unwound.

In his judgement this week, Judge Herrington found that there had been “potential consumer detriment” most of which was not taken into account by the Authority in making its Validation Order, and it was a relevant factor in making a new decision. By taking a narrow view of evidence from consumers the FCA made a decision “that could not be reasonably arrived at”.

“I must determine these references in favour of the applicants and remit the matter to the Authority for it to reconsider its decision,” Judge Herrington concluded.

He directed the FCA to take consumer detriment into account and the applicants should be asked to provide evidence within a given timescale.

Barclays Legal has confirmed that BPF will not take any enforcement activity on accounts that are subject of the Validation Order until the FCA has re-determined the application.