Wednesday, July 28, 2021


Investors in collapsed Buy2Let Cars face losses, FCA confirms

Investors in a collapsed car-hire scheme are facing losses, the City regulator has said, as it alleged that the firm had been…

By admin , in Markets , at March 17, 2021 Tags:

Investors in a collapsed car-hire scheme are facing losses, the City regulator has said, as it alleged that the firm had been trading while insolvent and claimed to own vehicles that did not appear to exist.

Buy2Let Cars collapsed into administration this week, shortly after the Financial Conduct Authority (FCA) had ordered it to stop accepting new investment because of concerns over its finances.

The company had described the decision as “bizarre” and accused the watchdog of putting jobs at risk.

The FCA outlined its reasoning in a detailed notice published on Wednesday, after Buy2Let Cars and its parent company, Raedex Consortium, fell into administration.

It highlighted concerns about the companies’ accounting and said they had been trading while insolvent, with £14m of assets but liabilities of £34m.

It said the firms, which have lost £10.5m in three years, would not be able to pay their debts – including repayments to investors – unless £34m was injected over the next three years.

“The FCA considers that the financial position … makes the firm’s business model fundamentally unsustainable and places consumers who invest money at direct risk of loss,” a spokesperson said.

The regulator also revealed details of alleged discrepancies in the Buy2Let Cars business model.

The company promised annual returns of up to 11% to investors who lent it a minimum of £7,000 over three years.

It used the money to buy new cars, which it then leased to people with a poor credit history via Wheels4Sure. Investors received monthly payments over the term of the loan, with interest paid at the end.

The FCA said the company claimed to own 1,200 cars but that there were question marks over these assets.

It found that from a sample of 102 cars, 55 were secondhand, even though the company said that used vehicles formed a minority of its fleet because its business relied on securing deep discounts on new ones.

Two of the cars could not be found on the DVLA database, and 18 leases were registered as having started significantly before the vehicle was on the road.

Buy2Let Cars valued its fleet at £19m when it should have been £14.4m, the FCA said, and the company also booked future lease payments as £7.5m of “goodwill” assets, when goodwill should only arise from business combinations.

The company’s founder and director, Reginald Larry-Cole, has deleted his Twitter account and a spokesperson for the company said he could not be reached.

His personal website remains active, advertising his services as a motivational speaker and mentor and his book Compassionate Capitalism, which he describes as a “riches to rags to riches” story.

The book describes his childhood in Sierra Leone, where he was the son of a wealthy tobacco executive who apparently lost everything. It is subtitled: “How I turned 150 Nos into 1 YES and built a multimillion empire.”

A synopsis describes it as an “inspirational and spiritual book”. It reads: “Through determination, hard work and believing in himself, the author realised his dream, through his struggles during the credit crunch and separation, finally achieving his victory with the one ‘Yes’.”

People who claim to be investors have said on the customer reviews website Trustpilot that they fear significant losses and have been unable to reach the company.

The administrator, RSM, has said it is trying to recoup funds for investors.

SOURCE

Comments


Leave a Reply


Your email address will not be published. Required fields are marked *