25 The North Colonnade
Canary Wharf
London
E14 5HS

Tel: +44 (0)20 7066 1000
Fax: +44 (0)20 7066 1099
www.fca.org.uk


FINAL NOTICE

Bouchers with Allansons Limited
25 Chorley Old Road
Bolton
Lancashire
BL1 3AD

ACTION

1. With effect from 1 April 2014, Bouchers with Allansons (“BWA”) was granted

interim permission pursuant to article 56 of the Financial Services and Markets
Act 2000 (Regulated Activities) (No 2) Order 2013 to carry on the regulated
activities of:

i. Debt-counselling under article 39E of the RAO; and

ii. Debt adjusting under article 39D of the RAO.

2. By an application dated 26 March 2015, BWA applied under section 55A of the

Act for permission under Part 4A of the Act to carry on those regulated
activities.

3. For the reasons listed below, the Authority has refused has decided to refused

the Application

SUMMARY OF REASONS

4. For the reasons set out herein, the Authority cannot ensure that BWA will

satisfy, and continue to satisfy, the threshold conditions set out in Schedule 6
of the Act. The Authority is not satisfied that BWA: is capable of being
effectively supervised, so as to meet the Threshold Condition set out in

paragraph 2C of Schedule 6 to the Act (Effective supervision); has appropriate
non-financial resources to be able to meet the Threshold Condition set out in
paragraph 2D of Schedule 6 to the Act (Appropriate resources); or is fit and
proper so as to be able to meet the Threshold Condition set out in paragraph 2E
of Schedule 6 to the Act (Suitability).

5. The Authority does not consider that BWA is ready, willing and organised to

comply with the requirements and standards of the regulatory regime: BWA
has not demonstrated that it both understands the applicable regulatory
requirements and is able to comply with them of its own accord.

6. The Authority has identified a number of failures by BWA to meet regulatory

requirements, namely that BWA:

i. does not keep orderly records that are sufficient to enable the Authority to

ascertain whether the firm is complying with its obligations under CONC
when giving debt advice, contrary to SYSC 9.1.1R. This means that the
Authority has not been able to satisfy itself as to the quality of the firm’s
debt advice.

ii. has been unable to resolve the Authority’s concerns about the quality of the

advice given by BWA on the basis of the records that BWA maintains. These
concerns include that BWA may not have adequately considered the
individual circumstances of customers prior to advising them to enter into a
debt management plan (“DMP”) (including a review of the enforceability of
any consumer credit agreements to which the customer is a party); nor
explained adequately why the recommended solution was appropriate
(including the nature of the DMP and the review of agreements, and the
likely cost to the customer);

iii. does not have appropriate systems and controls in place to ensure effective

quality assurance in respect of its advice processes;

iv. does not have appropriate systems and controls in place to reconcile client

money in accordance with CASS 11;

v. has failed to provide customers with statements as required by CONC

8.8.1R(8)(a) to (e);

vi. does not have in place adequate processes for reviewing and terminating

(where necessary) DMPs;

vii. has failed to ensure that its financial promotions and communications with

customers are clear, fair and not misleading (including as to the professional
status of BWA, the services offered by it and its charges for those services);
and

viii. does not have appropriate human resources at a senior management level

to identify the regulatory requirements that BWA must meet and ensure
that BWA complies with such requirements.

7. In the light of these failures, and in circumstances where the firm failed to

identify itself the deficiencies set out in paragraph 8, the Authority does not
have confidence that BWA is ready, willing and organised to comply with the
applicable regulatory requirements. In particular, the firm’s failure to comply
with SYSC 9.1.1R has prevented the Authority from assessing the quality of
BWA’s debt advice as it sought to do as part of its assessment of the

Application. This raises concerns as to the adequacy of BWA’s internal systems
of control and whether it can be supervised effectively by the Authority.

8. The concerns set out above are heightened because BWA holds an interim

permission and has therefore been required to comply with the Authority’s
regulatory requirements and standards since 1 April 2014. It has also had a
substantial period in which to address the concerns raised by the Authority
during its consideration of the Application, but has in large part failed to do so.

9. Accordingly, the Authority cannot ensure that, if the Application were granted,

BWA would satisfy, and continue to satisfy, the threshold conditions in
paragraphs 2C (Effective supervision), 2D (Appropriate resources) and 2E
(Suitability) of Schedule 6 to the Act.

10. In light of the above, the Authority has issued this Final Notice.

DEFINITIONS

11. The definitions below are used in this Notice.

“the Act” means the Financial Services and Markets Act 2000;

“the Application” means the application referred to in paragraph 2 above;

“the Authority” means the Financial Conduct Authority;

“BWA” means Bouchers with Allansons Limited;

“CONC” means the Consumer Credit sourcebook in the Authority’s Handbook;

“DMP” means debt management plan;

“I&E” means income and expenditure;

“the OFT” means the body that before 1 April 2014 was known as The Office of Fair
Trading;

“QA” means quality assurance;

“RAO” means the Financial Services and Markets Act 2000 (Regulated Activities)
Order 2001;

“SRA” means Solicitors Regulation Authority;

“SYSC” means the Senior Management Arrangements, Systems and Controls
sourcebook in the Authority’s Handbook; and

FACTS AND MATTERS

Background to the firm

12. BWA is a debt management firm that was incorporated with the name Choice

Collections Limited on 15 March 2010 and has applied for Part 4A permission to
carry on the regulated activities of debt adjusting and debt counselling. BWA is
wholly owned by Allansons LLP, a firm of solicitors, which acquired it in 2014.
Mr Roger Allanson, a partner in Allansons LLP, is the proposed holder of
controlled functions in BWA.

13. Between 15 March 2010 and 31 March 2014, BWA held a licence with the OFT

to act as a debt management firm.

14. On 1 April 2014, BWA became regulated by the Authority under interim

permission reference 635635 and applied for full authorisation under Part 4A of
the Act on 26 March 2015.

Overview of BWA’s business

15. BWA’s business model entails sourcing indebted customers who are seeking

debt advice. BWA offers advice on a range of debt solutions, although the only
debt solution offered in-house by BWA is a DMP.

16. In order to set up and administer a DMP, BWA has to engage in the regulated

activities of debt counselling (the giving of advice to a consumer about the
liquidation of a debt) and debt adjusting (most notably the activity of
negotiating the terms of the discharge of debt with a customer’s lenders).
BWA’s debt management services therefore fall under the Authority’s consumer
credit regime and the firm must be authorised by the Authority to carry out the
activities set out in its business plan.

17. BWA described its business model in the following terms. If the customer

agrees to enter into a DMP, the customer immediately begins making payments
into the DMP. For the initial period of the DMP BWA only makes token payments
to creditors, while holding the remaining money (after it has taken its fee) for
the customer in its client account. During this initial period BWA requests copies
of the customer’s credit agreements, assesses them for compliance with the
Consumer Credit Act, and, in cases of perceived non-compliance, challenges the
enforceability of the agreement with a view to achieving a total or partial write-
off of the debt. Where the debt is enforceable, BWA proceeds to negotiate with
the customer’s creditors to set up pro-rata repayment plans in respect of each
debt, following which it will receive and administer the customer’s payments to
creditors.

18. BWA’s principal source of income is from the monthly fees it charges customers

who have entered into DMPs.

19. BWA’s terms and conditions provided on 8 March 2017 to the Authority set out

the firm’s charges as follows:

i. The total fee payable for the DMP would be a maximum of 33% of the total

debt level at the start of the plan;

ii. 49% of the customer’s monthly payment would be retained in fees for the

first 20 months; and

iii. 33% of the customer’s monthly payment would be retained in fees from

month 21 onwards until the total fee had been paid.

20. There was also a term headed “What other charges there may be and why” in

the contract that provided a range of hourly rates that might apply:

i. £230/hour for the services of solicitors with over 8 years’ experience;

ii. £213/hour for the services of solicitors & legal executives with over 4 years’

experience;

iii. £189/hour for the services of other solicitors or equivalent fee earners; and

iv. £158/hour for the services of trainee solicitors or equivalent; and

v. £105/hour - Paralegals or clerks.

21. The firm did not state in what specific circumstances BWA would deviate from

its regular fee structure and charge an hourly rate although the contract did
give as one example: “your creditors decided to litigate and we need to defend
you or otherwise deal with the creditor in a different way”.

22. Since being made aware of the Authority’s concerns about its contract, BWA

has amended its terms to remove reference to the rates referred to in
paragraph 22. It has added a term that “A fee of 15% will be added to your
overall balance for any debts or balances removed in full, reduced or partially
settled.” The firm does not explain what sum the 15% relates to or how it
relates to the overall maximum fee of 33% referred to at paragraph 19(a)
above.

23. According to information provided by BWA on 8 June 2017 BWA had 137 debt

management customers as at that date.

24. In accordance with SYSC 9.1.1R, a firm must arrange for orderly records to be

kept of its business and internal organisation, including all services and
transactions undertaken by it, which must be sufficient to enable the
appropriate regulator to monitor the firm’s compliance with the requirements
under the regulatory system (and in particular to ascertain that the firm has
complied with all obligations with respect to clients).

25. Such orderly records are essential to enable a firm to assess the quality of its

advice (see below). They are also essential for a firm to be able to demonstrate
to the Authority that it is complying with requirements under the regulatory
regime, and for the Authority to ensure that good consumer outcomes have
been, and are being, achieved, including that appropriate advice has been
given to customers.

26. In order to comply with SYSC 9.1.1R, the Authority therefore considers that

BWA should keep orderly records that are sufficient to enable the Authority to
ascertain that the firm has complied with its obligations under CONC 8 (i.e. in
relation to the giving of debt advice). SYSC 9.1.1R is not prescriptive as to the
precise form in which these records must be kept, provided that the
overarching requirements of that rule are met.

27. The Authority has reviewed all customer files where BWA provided new/initial

advice (to five customers) and review advice (to 14 customers) (as required by
CONC 8.8.1(2) and (3)) during the period 24 February 2017 to 11 April 2017.
In each case, BWA’s record of the assessment of the customer’s circumstances
and the advice given during the meeting is limited to one or two sentences at
most. Given this brevity, the Authority was unable to assess from reviewing the
files whether in each case BWA complied with a number of relevant regulatory
requirements in CONC 8 in relation to each (or indeed any) of the 19
customers.

28. The Authority is concerned by this inability to assess BWA’s compliance with

CONC 8. In the absence of adequate records, the Authority could not be

satisfied that the advice provided to BWA’s customers was in compliance with,
for example, CONC 8.3.2R(1) to (3), CONC 8.3.4R, CONC 8.3.7R(2) and (5),
and CONC 8.5.4R(1) and (2).

29. By way of example, the relevant notes entries for Customer A (customer

number DT000297) states:

i. 28 February 2017: “Client has emailed in his income and expenditure

details”. The Authority notes that there is not a copy of this email on
Customer A’s file.

ii. 22 May 2017: “Client called in and said he was made redundant on Friday

and wants to reduce his monthly payment to £50, spoke to [staff member
A] she said its fine and that [staff member B] will call him when your back
to go over his I&E again? Emailed [staff member B]”.

iii. 15 June 2017: “outbound call - spoke with client and reviewed I&E and reset

payment. client was made redundant but has interviews. Reduced payment
until he is back in full time work but will get help from family if needed to
pay bills etc.,. Discussed other debt options but client is happy with the
service
we
are
providing.
We
spoke
regarding
ARC
debt
and

unenforceability, potential next steps and client instructed us to request
debt write off. then review case after response from creditor.”

30. The Authority considers that the records of how the customer’s I&E was taken

are not adequate to allow a proper assessment of whether BWA is complying
with CONC 8.3.7R(2)(a) which requires a reasonable and reliable assessment
of the customer’s financial position, his circumstances and other relevant
factors before giving any advice or recommendation on a particular course of
action in relation to the customer’s debts.

31. According to management information provided by BWA, a ‘review’ was carried

out with Customer A on 2 March 2017. The Authority understands this ‘review’
to be the initial advice provided to Customer A, as the date of first contact with
Customer A was 9 February 2017 and the first payment into the DMP was on 2
March 2017. However, there are no records/notes in the client file of the initial
advice and the file contains only one I&E document (which the Authority notes
is dated 15 June 2017 and shows a disposable income of £50).

32. Given the brevity of the notes, the Authority cannot identify: what specific

information the firm gathered as part of the fact-find; whether the firm carried
out a reasonable and reliable assessment of the customer’s circumstances; the
range of debt solutions discussed with the customer (and indeed what was
discussed about each solution); whether the customer has been provided with
appropriate advice; and whether or not the customer is on a suitable debt
solution.

33. The Authority raised with BWA the deficiencies in its record-keeping by

correspondence dated 22 September 2017. In response, BWA acknowledged
that in the case of Customer A’s file “More detailed notes should have been
added in order to provide a better overview of the client’s situation from the
outset. The notes on the file review carried out on the 15th June provided more
detail but again could have gone further into the discussion and the client
response to the debt options discussed, this would also have explained why
employment status was not amending (sic) and remained as employed”. The
Authority is of the view that the other 18 files reviewed by it evidence poor

record-keeping similar to that in Customer A’s file, which is acknowledged by
BWA.

34. In light of the above, the Authority considers that BWA does not keep records

in a manner compliant with SYSC 9.1.1R. As a result, the Authority cannot
identify whether BWA's debt advice complies with CONC 8. This is of particular
concern as the CONC provisions are designed to ensure that customers:

i. are provided with advice that is specific to their financial and personal

circumstances (and highlights the risks they face), and is not generic
advice;

ii. are given information about the available options that is sufficient for them

to make an informed choice as to how they wish to proceed; and

iii. understand, and are kept apprised of, the steps being taken by the firm on

their behalf.

35. The Authority therefore considers that the provisions of CONC 8 referred to in

paragraph 30 above are significant ones; this is especially so when one
considers the difficult circumstances faced by consumers who approach debt
management firms and the reliance they place on the expertise and
professionalism of such firms.

Concerns about adequacy of advice

36. Certain general features of BWA’s DMP book give rise to concerns regarding the

quality of BWA’s advice. Having analysed the management information
provided by BWA on 8 June 2017, the Authority is concerned about the
appropriateness of some of BWA’s plans.

37. A breakdown of the different financial solutions that BWA referred customers to

between June 2016 and June 2017 shows that of the 143 customers BWA
advised:

i. 116 were recommended “Litigation”, which the Authority understands to be

the DMP that BWA provides, which includes a check, where appropriate, on
whether consumer credit agreements are enforceable.

ii. Ten were recommended full and final settlement.

iii. Three were recommended individual voluntary arrangements.

iv. Two were recommended to seek help from the free sector.

v. No customers were recommended a debt relief order or bankruptcy.

38. Having further analysed the management information provided by BWA, the

Authority has concerns about the quality of BWA’s advice, which it is unable to
resolve in light of the record-keeping concerns set out above. Of the 137
current DMP customers BWA had as at June 2017:

i. There were 23 single creditor plans (17% of BWA’s client book) and 24

plans with only two creditors (18% of BWA’s client book). The low number
of creditors meant the customers may have been able to self-manage their
debts. If the customer self-managed the one or two debts they had, they
would have been debt-free more quickly and at a lower overall cost as they

would not have had to pay BWA’s fees. The Authority notes, for example,
that Customer B (DT000272) owed £11,589.95 to one creditor and BWA
was holding £5,004 (i.e. 43% of the debt owed) of the customer’s money. It
is possible that the money held by BWA could have been used in a full and
final settlement of this customer’s debt. In light of BWA’s inadequate record-
keeping, it is not clear to the Authority whether the firm discussed with its
single and/or dual creditor customers the availability of other debt solutions,
other services or self-managing the debt, as opposed to a long-term DMP.

ii. 59 plans (43% of BWA’s book) still have more than 10 years until the

customers would become debt-free. At the time the management
information was provided, 17 of these 59 plans were less than three months
old. These protracted plans concern the Authority as there may be a more
suitable solution for these customers, such as an individual voluntary
arrangement (which typically lasts a maximum of 6 years) or a debt relief
order (which typically lasts 12 months). By way of example, the Authority
notes that Customer C (DT000366) owed over £31,000, had a monthly
disposable income of £50 and, according to the management information
provided by BWA, was not a homeowner. The outstanding length of
Customer C’s plan was approximately 60 years. Another example is
Customer D (DT000032), who owed over £44,000, had a monthly
disposable income of £30 and was not a homeowner. The outstanding length
of Customer D’s plan was over 135 years, and so on the basis of this plan
this customer would never be debt-free. It is unclear to the Authority how
plans of over 60 and 135 years respectively would be in the best interests of
these customers. BWA’s records are insufficient for the Authority to
ascertain what advice was given by BWA to these customers on this issue or
what, if any, consideration was given to alternative options in the
management of the customers’ debt problems.

39. The Authority is concerned that the breakdown provided by BWA indicates that

its advice heavily favours the products it provides and, accordingly, that it may
not be generating outcomes that are in its customers’ interests.

40. The management information also shows that, of the 28 plans that had ended

where the customer had paid fees to the firm, 25 of these plans ended with the
customer still in debt and on average having 93% of their original debt still
outstanding. This raises concerns as to the suitability and effectiveness of those
plans. The Authority is further concerned that as a result of the firm’s fee
structure, 16 of these customers were in a worse position financially than when
they entered into the plans (as they had paid more in fees to the firm than the
amount of debt cleared during the plan). By way of example, the debt of
Customer E (DT000167) was reduced by only £8 while the customer’s plan was
ongoing despite paying £588 in fees to the firm. BWA’s records are insufficient
for the Authority to ascertain how these factors were taken into account in
advising these customers and what advice was given by BWA to them on this
issue.

BWA’s QA process

41. The Authority has concerns as to the adequacy of BWA’s systems and controls

in relation to its QA process.

42. On 26 November 2016, 8 December 2016 and 14 February 2017, the Authority

asked BWA to provide its QA policy and procedures. On 8 March 2017 BWA
provided a document “Bouchers QA process and framework”. Having reviewed
this document, the Authority’s view is that this is an employee appraisal

document and not a QA policy; for example, the document has sections for
“Performance goals and objectives” and “Skills and knowledge development” of
an individual employee. The document does not explain what BWA’s policy is
for QA of its customer files.

43. On 8 March 2017, BWA also provided a document entitled “Client File Review

Form v1”. This document consists of a number of binary ‘yes’/’no’ questions
including a comments section at the end, and lacks any detail to guide the user
as to how to evaluate the advice given. The Authority considers that this
document is not adequate for BWA to determine whether the advice provided to
the customer has complied with all the relevant regulatory provisions, and
record the outcome of this assessment.

44. To date, the Authority considers that it has not received BWA’s QA policy

and/or procedure. The Authority further considers that the QA review form and
the amount of QA being conducted is inadequate. During a telephone call on 14
March 2017, Mr Allanson of BWA informed the Authority that BWA did not have
a documented QA process. The Authority accordingly considers that BWA does
not have an appropriate QA system in place, as there is no documentation
which sets out the detail of what is involved in the QA process.

45. On 9 May 2017, BWA provided five completed QA file review forms and a log of

QA that had been completed. The log showed that the last QA was conducted
on 19 September 2016, despite the fact that according to management
information provided by the firm on 8 June 2017 BWA had taken on 76 new
DMPs and reviewed 36 existing DMPs since then.

46. The Authority considers that the QA that is being conducted by BWA is not

sufficient in terms of quality or quantity because:

i. no QA checks were conducted between 19 September 2016 and at least 9

May 2017, a period of almost eight months;

ii. the “Client File Review Form v1” & QA examples provided make no reference

to key areas the Authority would expect to be checked as part of the QA
process, such as the quality of the assessment of the customer’s
circumstances and the quality of the advice given; and

iii. where the QA check has identified an issue, BWA has not recorded what (if

any) remedial action was taken to rectify the issue.

47. Further, the Authority considers that any QA process implemented by BWA

would be ineffective, given the lack of information recorded in its files, as the
firm’s record-keeping is not adequate to enable any QA process to ascertain
whether the advice given complied with the relevant provisions in CONC. In
addition, in the light of its concerns as to senior management (as set out
below), the Authority is not satisfied BWA has any staff with the appropriate
skills to review the advice given by its debt advisers, and BWA has declined to
engage compliance consultants to assist it prior to knowing the outcome of the
Application.

Reconciliation of client money

48. As a CASS debt management firm, BWA is required to comply with the

obligations in CASS 11.11. The purpose of the client money rules in CASS is to
ensure that client money is adequately protected.

49. On 23 November 2016, the Authority requested BWA to provide its most recent

reconciliation of its client account. On 6 January 2017 BWA provided a
spreadsheet entitled “New Reconciliation”. This document was a ledger of the
customer payment history and not evidence of BWA reconciling its client
account.

50. On 24 April 2017, the Authority again asked BWA to provide its most recent

reconciliation of its client account. BWA responded on 9 May 2017 referring
back to the previously provided document. BWA also stated “Please also note
that a fuller reconciliation is in progress. Unhappily as we are, as you are
aware, using a system supplied by [Supplier X] we are dependent upon them
for the extract of some information which will enable this task to be completed.
As soon as it is I will forward it to be added to the submission in support of the
application.” To date the Authority has not received the reconciliation. The
Authority therefore infers that BWA is not reconciling its client account in
accordance with CASS 11.11.

Non-compliance with the rules in CONC 8.8.1R(8)

51. The rules in CONC 8.8.1R(8)(a) to (e) require BWA to provide a statement to

customers at the start of the DMP, and at least annually or at the customer's
reasonable request, setting out:

i. a balance showing the amount owed by the customer, including any interest

charges at the beginning of the statement period;

ii. fees, charges and other costs applied over the period of the statement,

including any upfront fee or deposit, such as an initial arrangement fee, an
arrangement fee, any periodic or management or administrative fee, any
cancellation fee and any other costs incurred under the contract;

iii. a narrative explaining the type of fee applied, how the fee is calculated and

to what it applies;

iv. the duration or estimated duration of the contract; and

v. the total cost of the firm's service over the duration or estimated duration of

the contract.

52. These rules are designed to ensure that customers are presented with key

information about their plan in one document, to help them determine whether
they wish to take out the product and to help them determine whether the
product continues to remain suitable on an ongoing basis.

53. The Authority’s review of the 19 client files where advice was given in the

period 24 February to 11 April 2017 (i.e. 14 new client files and 5 review client
files), indicates that BWA failed to provide any of the customers with
documentation that meets the requirements of CONC 8.8.1R(8)(a) to (e).

Review and termination policy

54. BWA was sent the “Dear CEO” letter that was sent out to all debt management

firms and published on the Authority’s website on 8 December 2016. The “Dear
CEO” letter highlighted BWA’s obligations when reviewing customers’ DMPs.

55. The “Dear CEO” letter is clear that the more time that has elapsed since a

customer last engaged in a review the less reliable the information BWA holds

about the customer is likely to be. This will impact on BWA’s ability to satisfy
various rules within CONC 8 (for example CONC 8.3.2R(1)(c) and CONC
8.5.1R(1)) and to ensure that the debt solution remains sustainable and
appropriate for the customer over time. The impact of this is that there may
come a point when BWA’s lack of confidence about the accuracy of the
information it holds means it becomes sensible for it to consider bringing to an
end its involvement in the DMP.

56. BWA provided its customer journey document and its termination policy on 8

March 2017. Despite the “Dear CEO” letter being sent three months prior to
BWA’s providing these documents to the Authority, they are not adequate as
they fail to explain what steps BWA will take if a customer fails to engage in a
review of their DMP. According to BWA’s processes the only circumstances in
which a DMP would be terminated is as a result of three missed payments. As
a result the Authority infers that BWA will continue a DMP indefinitely without
the customer engaging in reviews, as long as they continue to make payments
into the plan.

57. This process is not adequate to ensure that BWA continues to satisfy various

rules within CONC 8, in the event that a customer fails to engage in having
their DMP reviewed. This further means that BWA risks customer detriment by
retaining its customers on unsuitable plans for extended periods of time.

Financial promotions and communications with customers

58. CONC 3.3.1R requires BWA to ensure that its communications with customers

and its financial promotions are clear, fair and not misleading.

The status of the firm

59. In an information request sent on 23 November 2016, and re-sent on 8

December 2016, the Authority queried the SRA registration number 485689
that BWA had included in previous correspondence as this number returned no
results on a search of the SRA register. BWA’s response on 5 January 2017 was
that its SRA registration was in fact 69771. The SRA registration number 69771
also returned no results on the SRA register. When this was questioned BWA
stated on 8 March 2017 that the SRA was at fault in closing down the
registration number in error and that they had requested it be reinstated.

60. On 18 April 2017 BWA provided a series of emails between Mr Allanson of BWA

and the SRA, in which the SRA stated that:

i. the only SRA-registered firm Mr Allanson was currently employed by was

Allansons LLP, SRA ID 77580;

ii. SRA ID 69971 related to the sole practice of Paul Boucher, and this number

had been obsolete since 2008;

iii. it had previously told Mr Patel of BWA that if BWA was a separate entity, it

would need to apply for authorisation; and

iv. there was no record of BWA ever applying for SRA authorisation, and it had

not been given authorisation.

61. It is of significant concern to the Authority that, despite the Authority first

bringing the issue of BWA not holding a valid SRA registration to the attention
of BWA on 23 November 2016, BWA has continued to mislead customers by

using an invalid SRA registration number and promoting itself as an SRA-
registered law firm.

i. Letters in the client files dated as late as 16 June 2017 are headed as

“Bouchers Solicitors” and state in the footer “‘Bouchers’ is a trading style of
Bouchers with Allansons Limited (Regd No. 07189690) regulated by the
Solicitors Regulation Authority (no. 485689)…”.

ii. The footer of the webpage https://allansons.com/debt-management-

services/ stated until shortly before the issue of this Notice “‘Allansons,’
‘Bouchers’ and ‘Claims4all’ are trading styles of Allansons LLP … and the
wholly owned subsidiary Bouchers with Allansons Limited (regd. No
07189690) regulated by SRA no 69771”. (It now refers to the correct
interim permission reference number of BWA.) The webpage also states
“Our status as Solicitors gives us a unique understanding of the legal issues
surrounding debt management, enabling us to utilise effective strategies
that simply aren’t available to traditional companies”.

iii. The letter that is sent to customers with the contract states “We are an

experienced firm of solicitors...”.

62. The Authority considers that BWA’s financial promotions and communications

with customers do not comply with CONC 3.3.1R as they are likely to mislead
customers into thinking BWA is an SRA-registered law firm when it is not.
Furthermore, it has been using its claim to be a firm of solicitors to promote the
debt management services it provides as being superior to that of other debt
management firms. For example, in the contract cover letter it states “More
and more people are now facing financial difficulties so you are not alone and
whilst there are other sources of debt advice and services, some of which are
free of charge, many people like yourself are turning to ourselves to support
them because of the significant added value we can bring. What we are offering
is unprecedented for a firm of lawyers”. This is misleading to consumers as
BWA is not, and never has been, a SRA-registered firm.

63. The webpage https://allansons.com/debt-management-services/ advertises

debt management services and has BWA’s and Allansons’ names and
Companies House registrations in its footer. BWA told the Authority that this
webpage belonged to Allansons LLP and not to BWA. However, the Authority is
of the view that this webpage belongs to BWA as Allansons does not have
permission to engage in debt management activities.

Description of services and explanation of contract terms

64. By email on 8 March 2017, BWA provided the Authority with a copy of its

contract (including terms and conditions) as at that date.

65. Under the heading “Debt Management/Resolutions of Service (credit Resolve)

(sic)”, the contract stated the services provided by BWA were:

 negotiating with your creditors to deal with the debts

 initial advice on legal matters (at least to decide whether our other services,

listed below, are inclusive or outside of this Service Agreement)

 PPI reclaim – we will audit your accounts and where applicable will

commence claims for refunds for any mis-sold Payment Protection
Insurance

 Agreement Audit – we will request and check your agreements for

compliance with the Consumer Credit Act & advise on any issues arising &
their consequences

 Bank Charge reclaim – we will request a refund of any unfair charges on any

of your accounts

66. BWA stated in the contract that its fee was a maximum of 33% of a customer’s

total indebtedness. This was stated to be a departure from BWA’s normal
charging structure.

67. Under the heading “What other charges there may be and why”, BWA stated:

There may be occasions when we need to depart from the monthly
payments where, for example, your creditors decided to litigate and we
need to defend you or otherwise deal with the creditor in a different way.
In these circumstances, our fees would be based on an hourly rate to
provide our legal expertise.

These are as follows:



£230 - Solicitors with over 8 years’ experience


£213 - Solicitors & legal executives with over 4 years’ experience


£189 - Other Solicitors or equivalent


£158 - Trainee Solicitors or equivalent


£105 - Paralegals or clerks


Any outbound letters, calls, emails or texts will be charged at 1/10th
the hourly rates above


Any inbound letters, calls, emails or texts will be charged at 1/20th the
hourly rates above


Our prices are revised each November and we will tell you of the
revised prices at that time


We will advise how much we think a case departing from the monthly
fee structure will cost at the appropriate time

68. BWA appeared to have two charging structures: one that related to the debt

management services and another that related to issues that fall outside of the
debt management services. It was not clear from the wording of the contract
what services would fall within the ‘normal’ debt management contract and
what would be excluded. For example, the list of ‘debt management services’
covers ‘initial legal advice’ and the additional charges also covered litigation and
‘dealing with a creditor in a different way’.

69. Under the heading “Your right to cancel”, the contract provides:

“… If You provide Us with written notice to cancel outside of the “cooling-off”
period, this agreement will then be at an end, however, We will be entitled to
retain in full any fees which You have paid to Us and which have been received
in Cleared funds. Additionally, please note that as this agreement is a
departure from our normal payment structure, should you decide to cancel
prior to the end of the agreement, we reserve the right to charge our normal
hourly rates on a time spent basis as detailed above in “What other charges
there may be and why”

70. A spreadsheet entitled “FCA Client Fees and Payments” provided by BWA on 8

March 2017 demonstrates that BWA had been charging customers for the
service of checking credit agreements separately to the fees for the plan,
despite this being part of the service as described in the contract. BWA
informed the Authority that the checking of credit agreements was done by a
third party and this is why there was an extra cost. This was not set out in the
contract, and the Authority has not been provided with any evidence that it was
explained to the customer, orally or in any other materials.

Other issues mentioned in the contract

71. The contract lists PPI reclaim as a service provided. However, BWA cannot

engage in claims management activities as it is not a SRA-registered law firm
and/or does not hold a valid Ministry of Justice authorisation.

72. The contract provided on 8 March 2017 stated that complaints could be referred

to the SRA or the Legal Ombudsman. However, BWA is not a SRA-registered
law firm and so the SRA and Legal Ombudsman have no jurisdiction over BWA’s
debt management activities.

The revised contract

73. On 15 November 2017, BWA provided the Authority with a revised version of its

customer contract. This has rectified the issue set out at paragraph 70 above,
and has removed the “other charges” referred to at paragraph 67 above. BWA
subsequently explained that it had never intended to enforce these charges
against customers, unless litigation had been undertaken for the customer.
The Authority has seen no evidence that this was ever explained to customers.

74. In the new version of the contract, BWA has added a term that “A fee of 15%

will be added to your overall balance for any debts or balances removed in full,
reduced or partially settled.” The contract does not explain what sum the 15%
relates to or how it relates to the overall maximum fee of 33% referred to at
paragraph 19(a) above. BWA has not provided any other materials to the
Authority in which it explains to the customer how this term is intended to
operate, or evidence that it does so orally.

75. In the new version of the contract, BWA has rectified the issue mentioned at

paragraph 72 in relation to complaints.

76. The requirement for firms to ensure that clients are provided with

communications that are clear, fair and not misleading is important.
Accordingly, the absence of any customer documents clearly explaining the
matters identified above, or any record of any oral discussion which did so, is of
concern to the Authority. The lack of any clear explanation of how the charges
to be made under the contract and the services to which they would relate is of
particular concern to the Authority.

77. Further, to the extent that the issues identified have been rectified, the

Authority remains concerned that BWA did not take steps to ensure that its
customers were given a clear explanation of these matters prior to the
intervention by the Authority.

Non-compliance with the rules in CONC 3.9.3R

78. CONC 3.9.3R sets out the requirements for financial promotions and

communications with consumers in regards to debt management. As a financial
promotion the webpage is required to comply with the rules in CONC 3.9.3R.
BWA’s website is public-facing, and the firm can reasonably expect that it is the
first opportunity it has to promote its services to potential fee-paying customers
and some customers who view the webpage will not have had previous
communication with BWA. The Glossary in the Authority’s Handbook defines a
customer for debt adjusting and debt counselling as “an individual who uses,
may use or has used the services of a firm in carrying on that regulated
activity”.

79. The webpage fails to comply with specific rules in CONC 3.9.3R as follows:

i. CONC 3.9.3R(3) because the website fails to include the level of fees

charged for BWA’s services, how they are calculated and what service they
cover;

ii. CONC 3.9.3R(5) because the website fails to include a statement that a

customer may be eligible under the Financial Ombudsman Service and
referring by a link or otherwise to the information the firm is required to
publish under DISP 1.2.1R(1);

iii. CONC 3.9.3R(6) because the website fails to include a statement that the

firm's service is profit-seeking;

iv. CONC 3.9.3R(7) because the website fails to include a statement that the

firm's service is offered in return for payment from the customer;

v. CONC 3.9.3R(8) because the website fails to include a reference to impartial

information and to sources of assistance from not-for-profit debt advice
bodies;

vi. CONC 3.9.3R(9) because the website fails to include the most important

actual or potential advantages, disadvantages and risk of each debt solution
option;

vii. CONC 3.9.3R(10) because the website fails to include a statement setting

out the likely adverse effect of entering into the debt solution in question on
the customer's credit rating;

viii. CONC 3.9.3R(11) because the website fails to include a statement setting

out that evidence of entering into an individual voluntary arrangement, a
debt relief order or a protected trust deed will be entered on a public
register;

ix. CONC 3.9.3R(13) because as entering into a DMP with BWA will lead to a

period when payments to a customer's lenders or owners (in whole or in
part) are not made or are retained by the firm the website fails to include a
warning of the likelihood of falling into arrears or increasing arrears and an
explanation of when distributions would be made to lenders or owners;

x. CONC 3.9.3R(14)(a) to (e) inclusive because the website fails to include a

statement of the risks of entering into an individual voluntary arrangement
or a protected trust deed, as the case may be, including of the following
risks:


i. if the arrangement or deed fails, the risk of bankruptcy;

ii. homeowners may need to release equity from the value of their

homes to pay off debts, and that a remortgage may attract higher
interest rates or, if no remortgage is available, an individual
voluntary arrangement may be extended for 12 months;


iii. there are restrictions on the expenditure of a person who enters

into an individual voluntary arrangement or a protected trust deed;



iv. the customer's lenders or owners may not approve the individual

voluntary
arrangement
or
the
protected
trust
deed;

v. only unsecured debts included within the individual voluntary

arrangement or protected trust deed may be discharged at the end
of
the
period
and
unsecured
debts
not
included
remain

outstanding; and


xi. CONC 3.9.3R(15) because the website fails to include a statement that

where another option for dealing with a customer's debts is available, that
another option is available and may be suitable for the customer.


80. This information is important to ensure the communication or financial

promotion contains sufficient information to help consumers to make an
informed choice when deciding which debt solution they require.

81. Further, the fact that there was no mention in the contract or other materials

provided to the customer that the consumer credit agreement checking service
would be provided by a third party was a breach of CONC 3.9.3R(4).

Other issues with the website

82. Furthermore the website fails to comply with the fair, clear and misleading rule

at CONC 3.3.1R. The website states “A debt settlement plan is one of the most
efficient ways to get your finances in order and tackle unsustainable debts
head-on. Our unique debt settlement plan involves challenging your creditors to
prove what they say you owe them, in addition to reclaiming money from mis-
sold financial products and resolving debts using a full and final settlement
plan.” The website does not warn the customer that a lender is not obliged to
accept less in settlement than it is entitled to. In reaching the conclusion that
the website fails to comply with CONC 3.3.1R by omitting this warning, the
Authority has had regard to the guidance at CONC 3.3.10G(8).

83. The website also fails to include a link to the Money Advice Service’s website,

as required by CONC 8.2.4R.

Adequacy of senior management

84. In determining whether BWA has appropriate non-financial resources and is a

fit and proper person, the Authority has considered whether those who manage
BWA’s affairs have the adequate skills and experience.

85. The concerns identified in this Notice had not been identified and/or addressed

by BWA prior to the involvement of the Authority. The response of BWA’s senior
management to the Authority’s concerns has not been sufficient to demonstrate
that BWA is able to comply with its regulatory obligations. The Authority is not
satisfied that the firm’s senior management would, if BWA were granted Part 4
permission, be able to identify relevant requirements applicable to BWA and
ensure that BWA’s affairs were conducted in compliance with the regulatory
regime.

86. The Authority’s concerns about this failure on the part of BWA are heightened

by the fact that:

i. BWA holds an interim permission and has therefore been required to comply

with the Authority’s regulatory requirements and standards since 1 April
2014;

ii. BWA has had a substantial period in which to address the concerns raised by

the Authority during its consideration of the Application, but has in large
part failed to do so; and

iii. BWA’s senior management has expressed an unwillingness to engage

compliance assistance during the Application process, and stated an
intention only to do so if the Application is successful.

IMPACT ON THE THRESHOLD CONDITIONS

87. The regulatory provisions relevant to this Notice are referred to in Annex A.

88. During the assessment of the Application, the Authority identified a number of

failures by BWA to meet regulatory requirements. As set out more fully above,
BWA:

i. does not keep orderly records that are sufficient to enable the Authority to

ascertain whether the firm is complying with its obligations under CONC
when giving debt advice, contrary to SYSC 9.1.1R. This means that the
Authority has not been able to satisfy itself as to the quality of the firm’s
debt advice, despite having concerns about the quality of the advice given
on the basis of the records that do exist;

ii. has been unable to resolve the Authority’s concerns about the quality of the

advice given by BWA on the basis of the records that BWA maintains. These
concerns include that BWA may not have adequately considered the
individual circumstances of customers prior to advising them to enter into a
DMP (including a review of the enforceability of any consumer credit
agreements to which the customer is a party); nor explained adequately
why the recommended solution was appropriate (including the nature of the
DMP and the review of agreements, and the likely cost to the customer);

iii. does not have appropriate systems and controls in place to ensure effective

quality assurance in respect of its advice processes;

iv. does not have appropriate systems and controls in place to reconcile client

money in accordance with CASS 11;

v. has failed to provide customers with statements as required by CONC

8.8.1R(8)(a) to (e);

vi. does not have in place adequate processes for reviewing and terminating

(where necessary) DMPs;

vii. has failed to ensure that its financial promotions and communications with

customers are clear, fair and not misleading (including as to the professional
status of BWS, the services offered by it and its charges for those services);
and

viii. does not have appropriate human resources at a senior management level

to identify the regulatory requirements that BWA must meet and ensure
that BWA complies with such requirements.

89. In light of these failures and for the reasons set out below, the Authority cannot

ensure that, if the Application were granted BWA will satisfy, and will continue
to satisfy the threshold conditions in paragraph 2C (Effective supervision),
paragraph 2D (Appropriate resources) and paragraph 2E (Suitability) of
Schedule 6 to the Act.

The threshold condition in paragraph 2C (Effective supervision)

90. The Authority considers that it cannot ensure that BWA satisfies, and will

continue to satisfy, the effective supervision threshold condition in light of the
concerns identified above in relation to its failure to keep adequate records in
compliance with SYSC 9.1.1R.

The threshold condition in paragraphs 2D (Appropriate resources) and 2E
(Suitability)

91. The Authority does not consider that BWA is ready, willing and organised to

comply with the requirements and standards of the regulatory regime: BWA
has
not
demonstrated
that
it
understands
the
applicable
regulatory

requirements and is willing and able to comply with them of its own accord.

92. The Authority considers that it cannot ensure that BWA satisfies, and will

continue to satisfy, the appropriate resources and suitability threshold
conditions in light of the concerns identified above in relation to:

i. its failure to keep adequate records in compliance with SYSC 9.1.1R;

ii. its lack of systems and controls to carry out QA in relation to the advice

given by it, and compliance with CASS 11 in relation to client money;

iii. its failure to provide customers with statements as required by CONC

8.8.1R(8)(a) to (e);

iv. its lack of adequate processes for reviewing and terminating (where

necessary) DMPs;

v. its use of misleading financial promotions and communications with

customers; and

vi. its lack of appropriate human resources at a senior management level.

93. The Authority is particularly concerned by BWA’s failure to demonstrate that it

complies with SYSC 9.1.1R. As part of its assessment of the Application, the
Authority sought to assess the quality of the firm’s debt advice by way of a
review of 19 files against the requirements in CONC 8. However, the firm’s
deficiencies in its record-keeping have prevented the Authority from satisfying
itself that BWA’s advice is of a satisfactory standard.

94. The Authority has raised these concerns with BWA, but BWA’s responses further

evidence that it is not ready, willing and organised to comply with the
applicable regulatory requirements: it has failed to demonstrate that it has in
practice resolved these failings. BWA has not demonstrated that the firm
understands the regulatory rules applicable to it (for example as regards
record-keeping) and is both willing and able to comply with them.

95. BWA has had ample opportunity to ensure that it complies with the regulatory

regime, as it holds an interim permission and has therefore been required to
comply with the Authority’s regulatory requirements and standards since 1 April
2014. It has also had ample opportunity during the Application process to take
steps to improve its level of compliance with the applicable regulations. Aside
from the changes to its contract as set out above, which alleviate to some
extent the Authority’s concerns about the failure to give an adequate
explanation of important contract terms to customers, it has not taken the
opportunity to do so.

96. For these reasons, the Authority cannot ensure that, were the Application to be

granted, BWA satisfies, and would continue to satisfy, the threshold conditions
in paragraphs 2C, 2D and 2E of Schedule 6 to the Act in relation to the
regulated activities for which it seeks permission.

REPRESENTATIONS

97. Annex B contains a brief summary of the key representations made by BWA

and how they have been dealt with. In making the decision which gave rise to
the obligation to give this Notice, the Authority has taken into account all of the
representations made by BWA, whether or not set out in Annex B.

IMPORTANT NOTICES

98. This Final Notice is given under section 390 (1) of the Act.

99. Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of

information about the matter to which this Notice relates. Under those
provisions, the Authority must publish such information about the matter to
which this Notice relates as the Authority considers appropriate. The
information may be published in such manner as the Authority considers
appropriate. However, the Authority may not publish information if such
publication would, in the opinion of the Authority, be unfair to you or prejudicial
to the interests of consumers or detrimental to the stability of the UK financial
system.

100.
The Authority intends to publish such information about the matter to

which this Final Notice relates as it considers appropriate.

Authority contacts

101.
For more information concerning this matter generally, contact Marina

Lancaster, Manager, Lending and Intermediaries, Supervision Retail and
Authorisations Division at the Authority (direct line: 020 7066 5250 / email:
marina.lancaster@fca.org.uk).

Chair of the Regulatory Decisions Committee

ANNEX A

RELEVANT REGULATORY PROVISIONS

1. Section 55A(1) of the Act provides for an application for permission to carry on

one or more regulated activities to be made to the appropriate regulator. Section
55A(2) defines the “appropriate regulator” for different applications.

2. Section 55B(3) of the Act provides that, in giving or varying permission, imposing

or varying a requirement, or giving consent, under any provision of Part 4A of the
Act, each regulator must ensure that the person concerned will satisfy, and
continue to satisfy, in relation to all of the regulated activities for which the
person has or will have permission, the threshold conditions for which that
regulator is responsible.

3. The threshold conditions that relate to the current application are set out in Part 2

of schedule 6 of the Act. In brief, the threshold conditions relate to:

(1)
Threshold condition 2B: Location of offices

(2)
Threshold condition 2C: Effective supervision

(3)
Threshold condition 2D: Appropriate resources

(4)
Threshold condition 2E: Suitability

(5)
Threshold condition 2F: Business model

Relevant provisions of the Authority’s Handbook

Threshold Conditions - COND

4. In exercising its powers in relation to the granting of a Part 4A permission, the

Authority has regard to guidance published in the Authority’s Handbook, including
the part entitled ‘Threshold Conditions’ (COND”). Provisions relevant to the
consideration of the current application are set out below.

General guidance

5. COND 1.3.2G(2) states that, in relation to threshold conditions 2D to 2F, the

Authority will consider whether a firm is ready, willing and organised to comply
on a continuing basis with the requirements and standards under the regulatory
system which will apply to the firm if it is granted Part 4A permission.

6. COND 1.3.3BG provides that, in determining whether the firm will satisfy, and

continue to satisfy, the Authority threshold conditions, the Authority will have
regard to all relevant matters, whether arising in the United Kingdom or
elsewhere.

7. COND 1.3.3CG provides that, when assessing the Authority threshold conditions,

the Authority may have regard to any person appearing to be, or likely to be, in a
relevant relationship with the firm, in accordance with section 55R of FSMA
(Persons connected with an applicant). For example, a firm's controllers, its
directors or partners, other persons with close links to the firm (see COND 2.3),
and other persons that exert influence on the firm which might pose a risk to the

firm's satisfaction of the Authority threshold conditions, would be in a relevant
relationship with the firm.

Threshold condition 2C: Effective supervision

8. COND 2.3.1A(1) states that a firm must be capable of being effectively

supervised by the Authority having regard to all the circumstances including the
way in which the firm’s business is organised.

9. COND 2.3.3G states that, when the Authority is assessing threshold condition 2C,

factors which the Authority will take into consideration include, among other
things, whether it is likely that the Authority will receive adequate information
from the firm, and those persons with whom the firm has close links, to enable it
to determine whether the firm is complying with the requirements and standards
under the regulatory system for which the Authority is responsible and to identify
and assess the impact on its statutory objectives; this will include consideration
of whether the firm is ready, willing and organised to comply with Principle 11
(Relations with regulators) and the rules in SUP on the provision of information to
the Authority.

Threshold condition 2D: Appropriate resources

10. COND 2.4.1A (1) states that the resources of a firm must be appropriate in

relation to the regulated activities that the firm carries on or seeks to carry on.

11. COND 2.4.1A(4) states the matters which are relevant in determining whether a

firm has appropriate non-financial resources include the skills and experience of
those who manage the firm’s affairs and whether the firm’s non-financial
resources are sufficient to enable the firm to comply with requirements imposed
or likely to be imposed on the firm by the Authority in the course of the exercise
of its functions

12. COND 2.4.2G(2) states that the Authority will interpret the term 'appropriate' as

meaning sufficient in terms of quantity, quality and availability, and 'resources' as
including all financial resources (though only in the case of firms not carrying on,
or seeking to carry on, a PRA-regulated activity), non-financial resources and
means of managing its resources; for example, capital, provisions against
liabilities, holdings of or access to cash and other liquid assets, human resources
and effective means by which to manage risks.

13. COND 2.4.2G(3) states that high level systems and control requirements are in

SYSC. The Authority will consider whether the firm is ready, willing and organised
to comply with these and other applicable systems and controls requirements
when assessing if it has appropriate non-financial resources for the purpose of the
threshold conditions set out in threshold condition 2D.

14. COND 2.4.4G states that, when assessing whether a firm has appropriate

resources, the Authority will have regard to matters including:

(d)
Whether the firm has taken reasonable steps to identify and
measure any risks of regulatory concern that it may encounter in
conducting its business and has installed appropriate systems and
controls and appointed appropriate human resources to measure
them prudently at all times.

(f)
Whether the resources of the firm are commensurate with the likely
risks it will face.

Threshold condition 2E: Suitability

15. COND 2.5.1A(1) states that the applicant must be a fit and proper person having

regard to all the circumstances, including:

(c)
the need to ensure that A's affairs are conducted in an appropriate
manner, having regard in particular to the interests of consumers
and the integrity of the UK financial system.

(e)
whether those who manage A’s affairs have adequate skills and
experience and act with probity

(f)
whether A’s business is being, or is to be, managed in such a way
as to ensure that its affairs will be conducted in a sound and
prudent manner

16. COND 2.5.2G(2)G states that the Authority will also take into consideration

anything that could influence a firm's continuing ability to satisfy threshold
condition 2E. Examples include the firm's position within a UK or international
group, information provided by overseas regulators about the firm, and the firm's
plans to seek to vary its Part 4A permission to carry on additional regulated
activities once it has been granted that permission.

17. COND 2.5.4G(2)(c)G states that examples of the kind of general considerations to

which the Authority may have regard when assessing whether a firm will satisfy,
and continue to satisfy, threshold condition 2E include whether the firm:

(a)
conducts, or will conduct, its business with integrity and in
compliance with proper standards;

(b)
has, or will have, a competent and prudent management; and

(c)
whether the firm can demonstrate that it conducts, or will conduct,
its affairs with the exercise of due skill, care and diligence.

18. COND 2.5.6G provides that examples of the kind of particular considerations to

which the Authority may have regard when assessing whether a firm will satisfy,
and continue to satisfy, this threshold condition include, but are not limited to,
whether:

(1)
The firm has been open and co-operative in all its dealings with the
Authority and any other regulatory body (see Principle 11
(Relations with regulators)) and is ready, willing and organised to
comply with the requirements and standards under the regulatory
system (such as the detailed requirements of SYSC and, in relation
to a firm not carrying on, or seeking to carry on, a PRA-regulated
activity only, the Prudential Standards part of the Authority
Handbook) in addition to other legal, regulatory and professional
obligations; the relevant requirements and standards will depend
on the circumstances of each case, including the regulated
activities which the firm has permission, or is seeking permission,
to carry on;

(1A) The firm has made arrangements to put in place an adequate

system of internal control to comply with the requirements and
standards for which the Authority is responsible under the
regulatory system;

(7)(a) the firm has put in place procedures which are reasonably designed

to ensure that it has made its employees aware of, and compliant
with, those requirements and standards under the regulatory
system that apply to the firm for which the Authority is responsible
and the regulated activities for which it has, or will have
permission;

(7)(c) the firm has put in place procedures which are reasonably designed

to determine that its employees are acting in a way compatible
with the firm adhering to those requirements and standards; and

(10) the governing body of the firm is made up of individuals with an

appropriate range of skills and experience to understand, operate
and manage the firm's regulated activities.

Consumer Credit Sourcebook - CONC

19. This section of the Handbook is the specialist sourcebook for credit-related

regulated activities. As provided in CONC 1.1.2G, the purpose of CONC is to set
out the detailed obligations that are specific to credit-related regulated activities
and activities connected to those activities carried on by firms. These build on and
add to the high-level obligations, for example, in PRIN, GEN and SYSC, and the
requirements in or under the CCA.

20. CONC 3.3.1R(1) states that a firm must ensure that a communication or financial

promotion must be clear, fair and not misleading.

21. CONC 3.3.10G(8) gives as an example of a practice that is likely to contravene

the clear, fair and not misleading rule in CONC 3.3.1R “emphasising any savings
available to a customer by proposing to reschedule a customer's debts, without
explaining that a lender is not obliged to accept less in settlement of the
customer's debts than it is entitled to, nor to freeze interest and charges and that
the result may be to increase the total amount payable or the period over which it
is to be paid and to impair the customer's credit rating”.

22. CONC 3.9.3R states that a firm must ensure that a financial promotion or a

communication with a customer (to the extent a previous communication to the
same customer has not included the following information) includes:

(3) a statement setting out the level of fees charged for the firm's

services, how they are calculated, what service they cover and
where it is not possible to state an exact amount, a reasonable
estimate of the anticipated fees, or the average level of its fees, for
the service in question;

(4)
a statement of whether any aspect of the services is provided by a
third party or at extra cost;

(5) a statement that a customer may be eligible under the Financial

Ombudsman Service and referring by a link or otherwise to the
information the firm is required to publish under DISP 1.2.1R (1);

(6) where this is the case, a statement that the firm's service is profit-

seeking;

(7) where this is the case, a statement that the firm's service is offered

in return for payment from the customer;

(8) other than for a not-for-profit debt advice body, a reference to

impartial information and to sources of assistance from not-for-
profit debt advice bodies;

(9) where the financial promotion or communication sets out detail of

how a customer might resolve debt problems by explaining options,
the most important actual or potential advantages, disadvantages
and risk of each option, including those of the debt solution offered
by the firm;

(10) a statement setting out the likely adverse effect of entering into the

debt solution in question on the customer's credit rating;

(11) a statement setting out that evidence of entering into an individual

voluntary arrangement, a debt relief order or a protected trust
deed will be entered on a public register;

(12) where applicable, a statement setting out that a debt solution is

only available in a particular country of the UK;

(13) where entry into a debt solution with the firm will lead to a period

when payments to a customer's lenders or owners (in whole or in
part) are not made or are retained by the firm, a warning of the
likelihood of falling into arrears or increasing arrears and an
explanation of when distributions would be made to lenders or
owners;

(14) a statement of the risks of entering into an individual voluntary

arrangement or a protected trust deed, as the case may be,
including of the following risks:

(a) if the arrangement or deed fails, the risk of bankruptcy;

(b) homeowners may need to release equity from the value of their

homes to pay off debts, and that a remortgage may attract
higher interest rates or, if no remortgage is available, an
individual voluntary arrangement may be extended for 12
months;

(c) there are restrictions on the expenditure of a person who enters

into an individual voluntary arrangement or a protected trust
deed;

(d) the customer's lenders or owners may not approve the

individual voluntary arrangement or the protected trust deed;

(e) only unsecured debts included within the individual voluntary

arrangement or protected trust deed may be discharged at the

end of the period and unsecured debts not included remain
outstanding; and

(15) a statement that where another option for dealing with a customer's

debts is available, that another option is available and may be
suitable for the customer.

23. CONC 8.2.4R states that a debt management firm must prominently include:

(2)
on its web-site the following link to the Money Advice Service web-
site (https://www.moneyadviceservice.org.uk/en/tools/debt-
advice-locator).

24. CONC 8.3.2R states that a firm must ensure that:

(1)
all advice given and action taken by the firm:

(a) has regard to the best interests of the customer;

(b) is appropriate to the individual circumstances of the customer;

and

(c) is based on a sufficiently full assessment of the financial

circumstances of the customer;

(2)
customers receive sufficient information about the available options
identified as suitable for the customers' needs; and

(3)
it explains the reasons why the firm considers the available options
suitable and other options unsuitable.

25. CONC 8.3.4R states that a firm must ensure that advice provided to a customer,

whether before the firm has entered into contract with the customer or after, is
provided in a durable medium and:

(1)
makes clear which debts will be included in any debt solution and
which debts will be excluded from any debt solution;

(2)
makes clear the actual or potential advantages, disadvantages,
costs and risks of each option available to the customer, with any
conditions that apply for entry into each option and which debts
may be covered by each option;

(3)
warns the customer:

(a) of the actual or potential consequences of failing to continue to

pay taxes, fines, child support payments and debts which could
result in loss of access to essential goods or services or
repossession of, or eviction from, the customer's home;

(b) of the actual or potential consequences of not continuing to

make repayments under credit agreements or consumer hire
agreements;

(c) of
the
actual
or
potential
consequences
of
ignoring

correspondence or other contact from lenders and those acting
on behalf of lenders;

(d) that action to recover debts may be commenced, which may

involve further cost to the customer; and

(e) that by entering into a DMP or another non-statutory

repayment plan there is no guarantee that any current recovery
or legal action will be suspended or withdrawn.

26. CONC 8.3.7R states that a firm must:

(2)
before giving any advice or any recommendation on a particular
course of action in relation to the customer's debts, carry out a
reasonable and reliable assessment of:

(a) the customer's financial position (including the customer's

income, capital and expenditure);

(b) the customer's personal circumstances (including the reasons

for the financial difficulty, whether it is temporary or longer
term and whether the customer has entered into a debt
solution previously and, if it failed, the reason for its failure);
and

(c) any other relevant factors (including any known or reasonably

foreseeable changes in the customer's circumstances such as a
change in employment status);

(5)
seek to ensure that a customer understands the options available
and the implications and consequences for the customer of the
firm's recommended course of action.

27. CONC 8.5.1R states that a firm must ensure that a financial statement sent to a

lender on behalf of a customer:

(1)
is accurate and realistic and must present a sufficiently clear and
complete account of the customer’s income and expenditure, debts
and the availability of surplus income.

28. CONC 8.5.4R states that a firm must:

(1)
take reasonable steps to verify the customer’s identity, income and
outgoings;

(2)
seek explanations if a customer indicates expenditure which is
particularly high or low.

29. CONC 8.8.1R states that a firm in relation to a customer with whom it has

entered into a DMP must:

(2)
regularly
monitor
and
review
the
financial
position
and

circumstances of the customer;

(3)
adapt the DMP to take into account relevant changes in the financial
position and circumstances of the customer;

(8)
provide a statement to the customer at the start of the DMP, and at
least annually or at the customer's reasonable request, setting out:

(a) a balance showing the amount owed by the customer, including

any interest charges at the beginning of the statement period;

(b) fees, charges and other costs applied over the period of the

statement, including any upfront fee or deposit, such as an
initial arrangement fee, an arrangement fee, any periodic or
management or administrative fee, any cancellation fee and
any other costs incurred under the contract

(c) a narrative explaining the type of fee applied, how the fee is

calculated and to what it applies;

(d) the duration or estimated duration of the contract; and

(e) the total cost of the firm's service over the duration or

estimated duration of the contract.

Senior Management Arrangements, System and Controls - SYSC

30. This section of the Handbook sets out the responsibilities of directors and senior

management.

31. SYSC 6.1.1R states a firm must establish, implement and maintain adequate

policies and procedures sufficient to ensure compliance of the firm including its
managers, employees and appointed representatives (or where applicable, tied
agents) with its obligations under the regulatory system

32. SYSC 9.1.1R states a firm must arrange orderly records to be kept of its business

and internal organisation, including all services and transactions undertaken by it,
which it must be sufficient to enable the appropriate regulator to monitor the
firm’s compliance with the requirements under the regulatory system, and in
particular to ascertain that the firm has complied with all obligations with respects
to clients.

CASS Client Assets

33. CASS 11.11.3R states a CASS debt management firm must maintain its records

and accounts in a way that ensures their accuracy and, in particular, their
correspondence to the client money held for individual clients.

34. CASS 11.11.6G states so that a CASS debt management firm may check that it

has sufficient money segregated in its client bank accounts to meet its obligations
to clients for whom it is undertaking debt management activity, it is required
periodically to carry out reconciliations of its internal records and accounts to
check that the total amount of client money that it should have segregated in
client bank accounts is equal to the total amount of client money it actually has
segregated in client bank accounts. CASS 11.11.8R to CASS 11.11.23R provide
rules that the different types of CASS debt management firm are obliged to follow
to meet this obligation.

35. CASS 11.11.17G states for a CASS small debt management firm to demonstrate

it has maintained its records and accounts in a way envisaged by CASS 11.11.3R,
it should carry out checks of its internal records and accounts that are reasonable
and proportionate to its business. CASS 11.11.8R provides a rule that a CASS
small debt management firm is obliged to follow to meet this obligation.

36. CASS 11.11.8R states a CASS small debt management firm must undertake

periodic checks of its internal accounts and records to ensure that the amount of
money it holds in its client bank accounts is equal to the amount of client money
that should be segregated under CASS 11.9.

37. CASS 11.11.10G states the checks that a CASS small debt management firm is

required to undertake under CASS 11.11.8R include checking that its internal
records and accounts accurately record the balances of client money held in
respect of individual clients, and that the aggregate of those individual client
money balances are equal to the total client money segregated in its client bank
accounts. In undertaking the comparison between the internal records of
balances of client money and the client money segregated in client bank
accounts, a firm should use the previous day's closing client money balances and
should compare those with other records relating to the same day. In determining
an appropriate frequency for its record checks, a firm should consider the volume
and frequency of transactions in its client bank accounts.

ANNEX B

REPRESENTATIONS

1.
BWA’s representations (in italics), and the Authority’s conclusions in respect of
them, are set out below.

BWA is a firm of solicitors

2.
BWA is a firm of solicitors, which also carries on debt counselling and debt
adjusting. An application had been made to the SRA for registration and BWA had
understood it to have been granted. After an issue was raised by the Authority,
BWA had been shocked to discover that the registration had been closed down
(which was an error on the part of the SRA). A renewed application has been
submitted in respect of BWA; when this is granted BWA will revert to being a firm
of solicitors.

3.
In any event, Allansons LLP, which owns BWA, is a firm of solicitors regulated by
the SRA. As such, it is entitled to conduct activities which are regulated activities
under the Act under the terms of a general licence granted to the Law Society.

4.
Based on the information summarised at paragraph [60] of this Notice, the
Authority is satisfied that BWA is not a firm of solicitors registered with the SRA;
nor has the Authority been provided with any evidence of BWA ever having been
so registered, or of any error on the part of the SRA in this regard. The Authority
notes that BWA’s representations on this matter assert on the one hand that is a
firm of solicitors, but on the other hand implicitly acknowledge that it does not
have that status. While BWA is owned by a firm of solicitors, Allansons LLP, it is
misleading of BWA to represent itself as having that status.

5.
There is no general licence granted to the Law Society (or to the SRA). The OFT
did provide a general licence but that has not been continued by the Authority on
taking over responsibility for the regulation of consumer credit firms. BWA may
have in mind an exemption in respect of debt management activities pursuant to
article 39K of the RAO; this applies only in the course of providing advocacy or
litigation services, not where solicitors are engaged to conduct debt management
services only. It would also not apply to BWA, as the firm is not a firm of
solicitors.

BWA is willing to be regulated by the Authority, but the Authority has been unhelpful

6.
BWA is quite willing to be regulated by the Authority, and to meet the Authority’s
criteria and conditions. It would have hoped that the Authority would have offered
assistance but BWA has been told by the Authority that being compliant is BWA’s
own obligation and the Authority will not provide any advice. Where BWA has
managed to glean some advice, it has implemented it; if the steps taken are still
not acceptable then it needs to know what is. BWA remains flexible and open to
suggestions of any change that should be made.

7.
The expressed willingness of BWA to make changes appears to place reliance on
the Authority to identify what changes should be made; this is inappropriate. It
is not the role of the Authority to provide detailed feedback and guidance akin to
that to be expected of a compliance consultant. It is the responsibility of the firm

to identify the requirements of the Authority applicable to its business; however,
there is significant general information published by the Authority, to which BWA
could access to assist it in doing so (including the “Dear CEO” letter of December
2016). It is of concern to the Authority that BWA has not used the time during
which it has had interim permission to identify any changes to its practices and
procedures necessary to comply fully with its regulatory obligations.

Record-keeping

8.
BWA may have been hampered by not having call-recording facilities and having
to rely on note-keeping. Call-recording is not affordable at present; it intended to
implement this if the Authority were to grant the Application. While the note-
keeping may have been shorthand in earlier cases it is now more detailed. BWA
maintains that it gives appropriate advice. It has implemented a form (a copy of
which has been provided to the Authority) which goes through all the appropriate
steps to be taken and this is in use in respect of all new cases, detailing the
advice given and the conclusion arrived at.

9.
In the case of Customer A, the note of February 2017 was inadequate but this
does not indicate that the client had not cooperated, nor that the I&E details were
unknown. It is clear on the file that when the file was reviewed due to the change
in circumstances reported by Customer A an up to date I&E was on the system
and payment was reset to take into account the change of circumstances and the
discussion with Customer A.

10.
Customer A’s file is only one of 40 requested by the Authority and this reflects the
percentage of error.

11.
The Authority does not require firms to have call-recording facilities, although this
is one way of meeting record-keeping requirements. BWA has provided no
evidence to support its assertion that the notes taken by its staff have improved
in terms of detail recorded. The form provided to the Authority, referred to in
BWA’s representation, appears in fact to be the “Client File Review Form” (see
paragraphs 25 to 26 below) which appears to be intended to document a review
of the file rather than record advice given; even if used as a record at the stage
of the initial advice it would be inadequate for that purpose. As set out at
paragraphs 36 to 40 of this Notice, the Authority has concerns about the advice
given, but the records provided by BWA are inadequate to enable the Authority to
form a concluded view as to the adequacy of the advice given.

12.
In relation to Customer A, the Authority’s concern is with the record-keeping,
which BWA has admitted was inadequate. The Authority does not agree that it is
clear from the records in this case what advice was given by BWA when it
reviewed Customer A’s position with that customer (if indeed such a review took
place).

13.
As set out at paragraph 33 of this Notice, the Authority considers the record-
keeping in all other files which it has reviewed to be of a similar poor standard to
that in the case of Customer A. It does not agree with the comment by BWA that
the percentage of error is represented by that file alone. It notes that BWA has
not made any positive case that the records on any of the other files reviewed
were, in fact, of a better standard than in the case of Customer A.

The Authority’s concerns with the advice given are unfounded

14.
A simple view of how long it will take to pay off a DMP at the current disposable
income rate is only one measure of what is in the client’s best interests. There

were overriding reasons why other options were not suitable for Customers C and
D even though those might have got them out of debt sooner; for example,
Customer C did not wish their spouse to know of their debt problems.

15.
In the case of Customer B, while it might have been possible to use the
accumulated fund as a negotiating lever, it would not have been appropriate to do
so before ascertaining whether the agreement was enforceable, which had not yet
been done.

16.
Customer E paid £8 to avoid a default notice in respect of the customer’s credit
agreement, which was in fact unenforceable. The customer decided to take their
custom elsewhere and the accumulated fund (£602, not £588) was refunded.

17.
It takes time to assess the enforceability of consumer credit agreements and so
BWS cannot work out a client’s true level of indebtedness at the outset of a DMP;
rather it accumulates the customer’s funds pending that assessment being
complete.

18.
No customers have complained about the advice they have received from BWA
and many have said they are very pleased with the service provided.

19.
In relation to Customers C and D, the matters raised by BWA in its
representations are not evidenced on the relevant files. It is therefore not
possible for the Authority to assess whether BWA’s account of these matters is
accurate and what was considered and discussed with the clients at the relevant
times. The failure to record these factors increases the Authority’s concerns with
the record-keeping on these files, and does not allay its concerns with the quality
of the advice given.

20.
In relation to Customer B, the Authority remains of the view that the file failed to
record any advice given to the customer in relation to how the customer’s
accumulated fund might be used. The Authority notes that BWA has not
positively asserted that such advice was given. This is also of concern to the
Authority in other cases where the number of debts is low and where the
Authority cannot assess what other options were explored in advising customers
on how best to deal with their debts in a manner that takes account appropriately
of their individual circumstances.

21.
BWA appears to have misunderstood the Authority’s concern in relation to
Customer E. The Authority has not suggested that BWA did not refund the
customer’s accumulated fund. Its concern relates to whether the customer was
given advice that was in the customer’s best interests, given that the customer
was financially worse off following the DMP with BWA. The records in this file are
inadequate to indicate whether or not this was the case.

22.
A lack of complaints, and the existence of positive expressions of customer
satisfaction, do not necessarily indicate that customers have received suitable
advice or an adequate outcome.

Annual statements

23.
BWA does not accept that it is failing to provide the statements required by CONC
8.8.1R(8)(a) to (e). This matter has been rectified and implemented and the
rationale has been fully understood.

24.
By referring to the matter having been rectified, BWA’s representation implicitly
accepts that it has previously failed to provide annual statements as required by

the rule set out above. It has not provided copies of statements provided since
the rectification it has stated to have taken place, nor any other evidence of its
subsequent implementation of these requirements.

BWA now has a documented QA process

25.
BWA implemented a documented QA process following a telephone conversation
with the Authority in March 2017. It is unfortunate that this was omitted, but it
has been rectified. The solution is the Client File Review Form provided by BWA
to the Authority. If the Application is granted, BWA intends to implement call
recordings which would further assist with QA.

26.
The Authority notes the admission that BWA did not previously have a
documented QA process. The Client File Review Form provided is the document
referred to at paragraph 43 of this Notice, and the Authority considers it
inadequate for the reasons set out in that paragraph. The Authority’s further
concerns with BWA’s QA processes are set out at paragraphs 42 to 47 of this
Notice and the Authority notes that BWA has not provided any evidence to
address these concerns.

Handling of client money

27.
BWA’s accounts system was sold as SRA Accounts Rules compliant but it is not.
Independent accountants are working on a reconciliation. There is still a little
further work to be done on this but monthly reconciliations will be in place going
forward. The reconciliation will be forwarded as soon as it is completed.

28.
At the meeting held with the Authority on 8 January 2018, at which BWA made
oral representations in respect of this matter, BWA indicated that it had received
a letter indicating that the accounts had been reconciled as at June 2017, and
that it would forward a copy of this to the Authority.

29.
The Authority notes that compliance with SRA rules is not directly relevant to
whether BWA complies with the Authority’s rules on reconciliation of client
money, as set out in CASS 11. In any event, it notes that BWA’s representation
admitted that such (or, it appears, any) reconciliations had not, to date, been
performed. A copy of the letter referred to in the previous paragraph has not
been provided to the Authority, and a reconciliation as at June 2017 would, in any
event, not demonstrate ongoing compliance with the Authority’s rules in CASS
11.

Review and termination policy

30.
BWA has a termination policy, which is that if a client stops making payments for
three months and does not engage, then it will close the client’s plan down. BWA
takes the view that continued payment is contact and a sure indication that that
the client is content with things the way they are. The fact that BWA might
consider that the advice originally given may need updating is no reason to eject
the client from the service because it might turn out that the advice is correct.

31.
BWA’s termination policy is inadequate to comply with its obligations under CONC
8, for the reasons set out in paragraphs 54 to 57 of this Notice.

BWA does not have a website

32.
BWA does not have a website. The web page referred to by the Authority in fact
belongs to Allansons LLP, the owner of BWA. The contents, insofar as they

related to debt management, were not inaccurate (or were not intended to be)
but the references to debt management have now been removed. If and when
BWA has a website it will be fully compliant.

33.
The Authority considers the webpage referred to in paragraphs 61(b) and 63 of
this Notice to belong to BWA, for the reasons set out in paragraph 63. The web
page remains unaltered (save in the minor respect set out in paragraph 61(b)),
contrary to BWA’s representation. It is of concern to the Authority that BWA’s
senior management allowed a website to operate describing the services offered
by BWA, which did not comply with the Authority’s requirements, and has
consistently failed to address the issues identified, despite representing that it
had done so. In the absence of any details, the Authority places little weight on
BWA’s assurance as to future compliance.

Adequacy of senior management

34.
BWA’s senior management has been on a steep learning curve. The management
intends to move BWA into the same offices as Allansons LLP to make it easier for
senior management to supervise its operations directly.

35.
BWA plans to engage the services of a compliance consultancy to provide
compliance monitoring and assist senior management. However, it may not be in
a position, financially, to do so unless assured that it has a future as a regulated
firm.

36.
Given the nature of its concerns with the adequacy of senior management, the
Authority does not consider that increased direct supervision of BWA’s operations
by senior management personally will alleviate these concerns. In particular, the
Authority is not satisfied that senior management has acquired sufficient grasp of
the applicable regulatory requirements during the period of BWA’s interim
authorisation by the Authority and during the course of the Application process to
provide it with comfort in this regard.

37.
BWA has not provided a draft engagement letter nor any other details of the
scope of its intended retainer of the compliance consultancy. It has not provided
any indication of the timescale in which it intends to engage the consultancy, and
therefore there is no indication of how much longer BWA intends to continue to
operate while not compliant with the Authority’s requirements. Further, given the
Authority’s concerns about BWA’s senior management, it is not clear that BWA
will be able adequately to identify the areas on which it requires assistance from
the consultancy, so as to inform the scope of its retainer. Accordingly, this does
not allay the Authority’s concerns about BWA’s compliance in the future.

38.
BWA’s decision to defer seeking professional compliance advice unless and until it
has been authorised by the Authority gives rise to concern about the extent to
which BWA’s senior management prioritises the avoidance of consumer
detriment.

BWA’s fee cap is of great benefit to customers

39.
The 33% cap on BWA’s charges provides customers with certainty and an
incentive to BWA to deal with their debts expeditiously, since beyond a certain
point its services for long-term DMPs will be provided, effectively, free of extra
charge. This is something which sets it apart from its competitors.

40.
The Authority makes no comment on the fee offerings of BWA’s competitors. Any
benefit to customers in long-term DMPs of a cap on fees does not obviate the

need to ensure that a DMP is only recommended to a customer when BWA has
established on the basis of all relevant information that this is an appropriate
solution for the customer concerned, and for BWA to adopt record-keeping
procedures which enable it to assess by means of QA that it has done so, and to
evidence this to the Authority when required.