UK Bankruptcy Limited (UKB), which was based in Dorset, but incorporated in Edinburgh, attracted clients through advertising and referrals from another official looking website called ‘IVA Council’. The investigation found the company derived the majority of its income from fees charged to clients who used UKB to make themselves bankrupt. The fees, often running into thousands of pounds, bore no correlation to the work undertaken or the extent of the clients’ level of debt. The advice given was often very basic and could easily have been obtained for free.
In some cases the fees charged to clients’ credit cards rolled into the ensuing bankruptcy whilst the amount of fees appeared to equate to the amount of credit still available on their cards. This action meant that, in effect, the clients’ creditors were funding the company’s fees with no prospect of repayment. The investigation also found evidence that some clients allowed the company to maximise the amount of fees charged to their cards, in return for which they were given “cash back”.
Between about October 2007 and June 2008 the core business of UKB was generated by leads provided by an organisation called the IVA Council (IVAC), an unincorporated association which purported to be a voluntary independent body that monitored the insolvency industry. In reality IVAC was a marketing tool that generated leads for UKB by suggesting to individuals that they had been “mis-sold” an Individual Voluntary Arrangement (IVA) and they would be better placed financially by petitioning for their own bankruptcy. Clients referred via the IVAC were almost invariably persuaded by the UKB to discontinue an existing IVA and enter into bankruptcy.
Commenting on the case, Stephen Speed, Chief Executive of The Insolvency Service said:
“At a time when finances are so tight for so many people it is regrettable that a business like UK Bankruptcy Limited should use dishonest practices to exploit the demand for debt advice for its own financial gain. I hope the action we have taken will serve as an important reminder to anyone in debt; good quality advice is freely available from charitable organisations. In addition our publication ‘In debt: dealing with your creditors’ provides an overview of the personal insolvency options.”
Notes to Editors
1 The Office of Fair Trading have issued warnings recently about firms operating in this sector with concerns over declining standards and non-compliance with their Debt Management Guidance issued in 2001. This Guidance applies to all firms providing financial management services including IVAs, personal bankruptcy and commercial credit repair. In particular the OFT have warned that firms often mislead individuals with debt problems with websites that imply they have some official status or sanction from the Government and are less than transparent about the level of their charges.
2 UK Bankruptcy Limited was incorporated in Scotland on 1 June 1992 and its registered office is at 24 Great King Street, Edinburgh, EH3 6QN. The company carried on business from Alton Chambers, 37 Church Road, Parkstone, Poole, Dorset, BH14 8UF.
3 The company’s debt advice business was carried on from about June 2005 to the presentation of the petition. Its association with the IVA Council lasted from October 2007 to June 2008.
4 The investigation was carried out under section 447(3) of the Companies Act 1985 by officers from Company Investigations, part of The Insolvency Service.
5 The petition was presented on 8 December 2008 under s124A of the Insolvency Act 1986 on public interest grounds that; the company’s business was unscrupulous, inappropriate and operated to the detriment of creditors of the company’s clients and sometimes the debtors themselves.
6 The company’s turnover for the year ended May 2008 was approximately £2.8M and it had more than 3,000 clients.
7 The directors and joint shareholders of the company were Sean Mason and Tobias Gooden then of Throop Road, Bournemouth, and Wimbourne Road, Wimbourne respectively.
8 William Thomas Mercer Cleghorn, Insolvency Practitioner, now of Aver Chartered Accountants, was appointed Provisional Liquidator of the company on 9th December 2008 pending hearing of the petition and became Interim Liquidator of the company on the making of the order on 10 December 2010. All public enquiries concerning the affairs of the company and the prospects of a dividend should be addressed to Mr. Cleghorn as follows:
21 York Place
Tel: 0330 555 6155
9 The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies, through the Official Receiver to establish why they became insolvent. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice. Further information about the work of the Insolvency Service is available from http://www.insolvency.gov.uk