Customers of defunct lender Welcome Financial Services Ltd, a subsidiary of former FTSE 250 subprime lender Cattles, can now submit claims to the Financial Services Compensation Scheme in relation to advice on any regulated financial product, it has been announced.
FSCS declared Welcome in default on 2 March 2011 but for the past three years the scheme has been paying compensation to customers of the firm with eligible payment protection insurance claims only.
As part of an “innovative” restructuring arrangement set up by Cattles, the subprime lender that acquired Welcome in 1994 and eventually grew to a valuation of £1bn but that is now being wound down, FSCS costs in relation to these PPI claims were covered by the failed firm.
In 2012, the FSCS reported that Welcome claims did not fall to the industry and the PPI claims were being funded by Welcome “following an innovative scheme of arrangement” agreed with the FSCS. This is still the case the new claims, a FSCS spokesperson confirmed.
Welcome was given a final notice by previous regulator the Financial Services Authority in March 2012 for market abuse, including misreporting figures relating to ‘toxic’ loans for a lengthy period of time in a scandal that eventually brought down the Cattles Group.
PricewaterhouseCoopers is being sued on behalf of creditors to Welcome’s parent company, who claim that basic audit checks should have revealed that the loan book of Welcome – Cattles’ biggest unit – was much weaker than stated, FTAdviser sister publication the Financial Times previously reported.
In July 2013, the FT reported that PwC had also implicated Deloitte and KPMG into the lawsuit, claiming that both firms had also examined the way subprime lender Cattles set aside money against bad loans without exposing the massive under-provisioning that eventually brought its downfall.
PwC also further argued that the damages of up to £1.6bn claimed in the case were inflated.
James Corr, Cattles’ former group finance director, Peter Miller, Welcome’s former finance director, and John Blake, the former managing director of Welcome, have all been banned and fined a total of £700,000 by the City regulator.
PwC’s legal defence in the Cattles case was being led by Margaret Cole, the former director of enforcement at the FSA who joined the accounting firm last year as its general counsel.
