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Direct Financeuk Limited – prosecution and seized assets

The Court result

A case relating to Direct FinanceUK Ltd was heard at Newport Crown Court on 4 January 2013; His Honour, Judge Philip Richards, sentenced the Company to a conditional discharge for two years for the 23 Fraud Act 2006 charges and the two Consumer Credit Act 1974 charges that the Company had pleaded guilty to at an earlier hearing. Further, His Honour granted a Confiscation Order under the Proceeds of Crime Act 2002 for £86,147.80 to be satisfied within three months and awarded Newport City Council £25,968.20 costs. All seized items, including in excess of 30 computers, were forfeited for destruction.

In his summing up, His Honour described the activities of the Company and its directors as a despicable fraud in preying on vulnerable consumers who were suffering from financial difficulties. His Honour made it clear that if the main director of the Company, now resident in Pakistan, had been brought before the Court then a long prison sentence would have been imposed. His Honour said that it was regrettable that this "principal fraudster" had not been brought before the Court but understood that Newport City Council had made every effort it could to make this happen and that the pragmatic view point of the prosecution in relation to this matter was acknowledged by the Court.

His Honour added that the sentence and confiscation amount in this case should not be seen as a "green light" to others who may behave in this manner as they may be proceeded against via international arrest warrants and larger confiscation orders.

The Investigation

On 13 January 2009, as a result of information from the Office of Fair Trading, a criminal investigation was started by Newport City Council Trading Standards Section regarding alleged offences committed by Direct Financeuk Limited contrary to the Consumer Protection from Unfair Trading Regulations 2008, the Fraud Act 2006 and the Consumer Credit Act 1974. In addition, potential money laundering offences, contrary to the Proceeds of Crime Act 2002, were identified.

Two hundred and ninety two complaints were received from consumers across the UK regarding the Company with the registered office address of Saadat House, 71 Commercial Road, Newport. Information obtained from Production Orders granted in October 2009, and further enquires, revealed that the Company received income in excess of £1,000,000 between May 2008 and January 2010.

Direct Financeuk Limited, which had been incorporated on 15 November 2007, operated from two commercial addresses in the Newport area. At Saadat House, the Company latterly dealt with customer care, complaints and administrative aspects of the operation while their premises at Pill Box Hall, Church Street, Newport, contained the telephone contact function responsible for cold calling potential customers, and the collection of consumer payment details. The Company is understood to have employed approximately 80 people between the two sites at its peak. Enquiries into the methods used by Direct Financeuk Limited, such as examination of victim statements and analysis of the Consumer Direct database revealed the following:

An initial unsolicited phone call was made in which the Company stated to the consumer that they understood they were looking for a loan and that Direct Financeuk Limited was able to provide one. In most cases the consumers had previously applied for a loan from a lender but had been refused – the Company purchased the contact details of such consumers from a company selling ‘leads’. After basic income and bank account details were obtained the consumer was put on hold and told that this was to allow the Company representative to obtain the necessary approval to grant the loan, however, as Direct Financeuk Limited were not lenders this approval could never be legitimately given.  The consumer was then told that the loan had been approved and an administration fee, usually £49.99, would be charged and sometimes that it would be deducted from the loan, not taken from the consumer’s bank account.

In some cases consumers received paperwork containing details of the loan and repayment schedules. The documents failed to comply with the Consumer Credit Act 2006 and contained figures that varied significantly to those quoted during the original telephone discussion.
In all instances the administration fee was deducted from the consumer’s bank account within two to three days of the initial call. In some instances there were multiple withdrawals of the administration fee.

When a consumer requested a refund they were informed that up to six months is permitted for the Company to find and provide the loan. According to the rules of the Consumer Credit Act 1974; a licensed credit broker is allowed six months to find the loan; as long as they have correctly identified and introduced themselves as credit brokers in the first instance; Direct Financeuk Limited actually introduced themselves as “an independent financial institution”; when asked if they were a “credit broker” they generally answered, “no”.

Thirty one witness statements detailing offences referred to in the above paragraphs were obtained and spanned the whole period of the Company’s operation. 20 of these statements formed the basis of the Fraud Act charges.

Direct Financeuk Limited, as a separate legal entity, was not licensed by the Office of Fair Trading to act as a consumer credit business in any capacity for almost the first two years of its existence and for a period of time advertised false licence details on advertisements, Company documentation and its website.
From 13 January 2009, Direct Financeuk Limited used the credit licence number of Residential and Commercial Finance Limited trading as Black Sheep Finance (previously trading as “Direct Finance UK”).

The Trading Standards Section obtained evidence from two credit lender portals (UCC and Gateway2Finance) that 36,562 consumers’ details were processed by Direct Financeuk Limited between 25 August 2008 and 27 January 2010 but analysis showed that only 137 consumers (0.38%) actually received loans.

On 28 January 2010, officers from the Section, together with officers from Gwent Police and Wales Scam Busters, executed entry warrants at the two business premises and a number of residential addresses associated with officials of Direct Financeuk Limited. 5 individuals involved in the running of the Company were arrested. A vast amount of documentation and a large number of computers were seized. £18,000 in cash was also seized by the Section’s Accredited Financial Investigator from one of the residential premises. This was subsequently forfeited at a cash seizure hearing in February 2012.

Restraint Orders were swiftly put in place on the Company’s bank accounts, 2 residential properties owned by the officers of the Company and a Range Rover owned by the main director who had flown to Pakistan in December 2009.

During the course of the investigation a number of ex-employees gave witness statements as to the way the business was run.
Cataloguing of the seized documentation took a number of months. Subsequent analysis of the documentation, computer forensics and ex-employee statements revealed that other individuals may have been complicit in the alleged offences so another 2 arrests were made.

All 7 individuals arrested were bailed on a number of occasions as the investigation progressed, though ultimately none were prosecuted.

During the complex, protracted investigation Direct Financeuk Limited was dissolved by Companies House as no accounts had been filed. In order to bring the prosecution the Council went through the Civil Courts in order to administratively restore the Company.
A number of different prosecution avenues were explored; however, following barrister advice, the Company was prosecuted for the Fraud Act 2006 and Consumer Credit Act 2004 charges that representatives of the Company (acting on behalf of the exiled director) eventually pleaded guilty to.

The successful conclusion of this case is largely due to the tenacity and dedication of the investigating officers. Thanks must also go to the Council’s Legal Team, barristers and officers of Gwent Police whose help and assistance was invaluable.

DATE: 29 April 2013