Two directors of a Manchester-based loan brokerage, First Money Direct Limited, have been disqualified for a total of 13 years after failing to secure loans for over 99 percent of fee paying customers.
The directors were disqualified by the High Court for their part in the sham operation following an official investigation by the Insolvency Service. The disqualification follows the winding up of the company on public interest grounds in May 2012.
Husband and wife team
The company was run by husband and wife team, Assad Ayaz Aymi and Zaibunnisa Naji, both 33 years of age. While Mr Aymi, who was not an appointed director of First Money Direct, managed the day-to-day affairs of the company, Ms Naji was effectively a director in name alone.
Mr Aymi and Ms Naji have been disqualified from acting as directors of a limited company for periods of nine and four years respectively. Not only were they guilty of failing to secure loans for their clients; they also failed to reimburse brokerage fees to their many unsatisfied customers.
The couple subsequently abandoned the company, resulting in the loss of company records and leaving cash and cheque withdrawals of £11,727 and £22,354 unaccounted for.
Duping vulnerable lenders
The couple made their money by duping clients who had been refused a loan by other lenders. Charging administration fees of £49.95 or £99.95, First Money Direct failed to arrange loans it said had been approved or guaranteed, or offered clients loans on worse terms than were originally quoted.
Commenting on the disqualifications, a spokesperson for the Insolvency Service’s Public Interest Unit, said: “The disqualified directors allowed the company to be involved in a scheme to take monies from members of the public who, on the whole, were already in financial distress, for which little or no service was rendered. They also failed to maintain proper accounting records.
“The Insolvency Service will not hesitate to use its enforcement powers to remove irresponsible and culpable directors from the business environment.”
The investigation’s findings
The Insolvency Service’s investigation found that First Money Direct referred at least 1,353 fee-paying clients to loan providers between 28 May 2010 and 13 September 2011. Of those customers, less than one percent received a satisfactory loan offer and entered into a loan agreement as a result.
The company was wound up on 2 May 2012 upon a petition issued by the Secretary of State for Business, Innovation and Skills. Further investigations found that First Money Direct had total liabilities of £380,603, £295,745 of which was payable to the company’s customers.
Mr Aymi and Ms Naji’s disqualification prevents them from:
- Acting as a director of a company;
- Taking part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership;
- Acting as an insolvency practitioner; or
- Being a receiver of a company’s property.
Clearly, this case brought by the Insolvency Service is an extreme one but if you are taking money from customers and providing services there are some things you should avoid to stay out of trouble.
Top tips for avoiding trouble when taking customer money when providing customer services
- Always keep customer deposits/advance payments in a separate bank account from your business trading account
- Never promise to provide a service you cannot deliver
- Never take a goods order deposit when you are not 100% certain you can deliver the goods
- Always keep accurate records and bookkeeping so a clear sales audit trail is visible
- If the company is insolvent you should stop taking and placing new orders for goods on credit
Keep up with all the latest insolvency, liquidation, administration and business rescue news at the Jameson, Smith and Co. blog. Alternatively, for a free consultation or more information about our services, please get in touch with our experienced team of turnaround practitioners today.