Three directors of
failed subprime lender Cattles and its subsidiary
Welcome Financial Services have been banned from the industry
by the Financial Services Authority (FSA) and fined a total of
£700,000 for misleading information regarding the company’s loan
book.

The Yorkshire-based finance provider was also
censured for “acting without integrity” in the years leading up to
the collapse of the company by understating default rates.

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Cattles’ finance director James Corr and Welcome’s finance director
Peter Miller were fined £400,000 and £200,000 respectively.
Both men and Welcome’s managing director John Blake have been
banned from working in any area regulated by the FSA. Blake was
also fined £100,000 although he is appealing against the
decision.

The FSA said all three would have been fined
more had their personal finances afforded it; £750,000 for Corr,
£400,000 for Miller.

Subprime gap

Cattles has not been receiving new business
through Welcome Car Finance since 2009, leaving a
giant hole in the subprime market.

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At its peak, lending by the company was in the
region of £150m per month by volume, comprised of four distinct
areas.

An estimated 35% of finance was in secured
loans, 25% in personal loans, 25% in standard hire-purchase through
Welcome, and 15% through Welcome Car Finance hire-purchase.

In all, the company was writing approximately
5,000 car finance contracts each month with an average advance of
around £7,000.

“Highly misleading
arrears”

Cattles was listed on the London Stock
Exchange in 2008 but suspended in 2009 after the company admitted
it had underestimated the provision made to cover bad loans.

Both the Batley financer’s 2007 annual report
and 2008 rights issue prospectus included “highly misleading
arrears, impairment and profit figures”.

The report stated that £900m of Welcome’s £3bn
loan book was in arrears when, in truth, the figure was roughly
£1.5bn. Cattles reported a pre-tax profit of £165.2m in 2007 when
it should have listed £96.5m loss.

Cattles and Welcome continue to collect loan
repayments following a 2011 restructuring plan to avoid bankruptcy
which left shareholders with 1p per share, totalling company value
at £5m, compared to an earlier rights issue price of £1.28 when
Cattles’ equity was valued at £1.5bn.

richard.brown@vrlfinancialnews.com