FCA restricts Ethica resolve in significant development for recipients of West 28th Street Repayment Demands and Letters of Claim

The intervention follows the issue of Repayment Demands, Default Notices and, more recently, Letters of Claim to a high number of individuals connected to historic contractor loan, loan-based remuneration and Employee Benefit Trust (EBT) arrangements, commonly referred to as “disguised remuneration schemes”.  West 28, which bought the loans from a third party, is not itself authorised or regulated by the FCA.

The restrictions on Ethica are significant.  Under the requirements agreed with the FCA, Ethica must write to affected individuals explaining that they do not have an enforceable obligation to make payment at this stage.  The FCA has confirmed that Ethica and West 28 require a validation order (from the FCA) and an enforcement order (from the Courts) to be able to seek enforcement of the loans, and that there is no guarantee that either will be granted. In practical terms, this means that the individuals affected do not need to pay now, while the regulatory and legal issues relating to the purported loans are resolved.

Ethica must make no further demands for payment from affected individuals in the current proposed court claims while those issues are resolved, and Ethica and West 28 will not ask the court to enter a ‘default judgment’ against anyone who has not responded to a legal claim.  Additional protections are being put in place for individuals who may be vulnerable.

Whilst the FCA’s announcement is a welcome development, it does not mean that the claims have come to an end. We understand that Ethica intends to issue Court claims against over 3,000 people this week.  The FCA has been clear that W28 can continue issuing and serving court proceedings, and that individuals should not ignore any formal court documents they receive and should consider seeking independent legal or debt advice before deciding what to do.  Anyone who receives a Claim Form, Particulars of Claim or other court document should therefore pay careful attention to the deadlines for responding.

Greenwoods is currently advising a growing client group affected by the West 28th Street matter, including individuals who have received Repayment Demands, Default Notices and Letters of Claim.  We are up to date on the legal and regulatory issues described by the FCA, and our team is actively advising clients on the implications of the FCA’s intervention, the enforceability of the alleged debts and preparation for the next stages of the process.