A Debt Purchasing and Collections Company has been forced to write off £414m worth of debt after failings within its dilligence processes.
‘Motormile Finance UK’ was found by the Financial Conduct Authority to have inadequate collections processes in place to deal with purchased debts.
The company which also trades as MMF, MMF Debt Purchase and MMF UK is a third party debt collection agency and also buys debts such as unpaid short term finance agreements.
The Financial Conduct Authority stated that MMF had “failed to conduct sufficient due diligence upon the purchase of a debt portfolio to be satisfied that the sums due under customer loan agreements were correct”. These failings are said to have led to “unfair and unsuitable” situations for debtors.
MMF has agreed a redress to more than 500,000 individuals – The redress is said to consist of £154,000 in refunds to people that had paid them monies. MMF have also agreed to the writing off of £414 million of debt.
The £414m represents debts where the company has insufficient proof of debt and are no able to validate their claims for payment.
In February 2015 the FCA appointed a ‘skilled person’ to conduct a review of Motormile’s existing loan portfolios and collections processes, including its due diligence. The company has since changed its processes, systems and controls to lessen the risks identified.
In August 2016, the FCA finally authorised Motormile to provide Debt Collection services. This was after having been satisfied MMF’s poor practices were in the past and major changes to procedures had been made by the firm.
The new changes are said to include a bespoke new IT collections system and the appointing of a new Chief Executive.
Jonathan Davidson, Director of supervision, retail and authorisations at the FCA, said “We have agreed this package, and previous action, to protect the customers of Motormile from unfair practices. We have worked closely with Motormile, and are now satisfied with their progress and the way that they will address their previous mistakes.”
He continued “This evidences the importance of conducting sufficient due diligence and how failing to do so leads to poor treatment of customers.”