The City regulator has halted new business at a company that promises bumper returns from a car hire scheme aimed at people with poor credit ratings, prompting a backlash from the firm at the “bizarre” decision.
The Financial Conduct Authority (FCA) said it was concerned about the “viability” of Buy2LetCars, after raising regulatory concerns with directors.
Buy2LetCars is now barred from arranging any new leases on behalf of its investors, although it can continue collecting payments from people who have hired cars via sister brand Wheels4Sure.
“We are surprised at the FCA’s interpretation of accepted accounting standards and principles,” said the directors of Raedex Consortium, which owns the business.
“Although our company is well financed with a strong cashflow and bank balance, the FCA is putting 24 jobs at risk with this bizarre decision.
“We would like to reassure our customers that we fully intend to challenge this and will be in touch with them directly this week.”
Buy2LetCars promises its investors annual returns of up to 11%, if they lend the company a minimum of £7,000 over three years. It uses the money to buy new cars, which it then leases to people with a poor credit history via Wheels4Sure.
Investors receive monthly payments over the term of the loan, with interest paid at the end of the term.
This form of investment is not regulated, so investors do not have recourse to the Financial Ombudsman. But the FCA can prevent the company from arranging new leases and has now wielded its power to do so.
The FCA said it had had concerns about the company for some time.
“We have engaged with the firm on a number of occasions with regard to regulatory issues, including the structure of its business and its financial viability. This has culminated in the action we took on Friday 19 February 2021.
“Our interventions, following detailed analysis, were imminent and we took steps on Friday to best protect the interests of investors.
“As always our objective is that any issues that may affect a firm’s viability are handled in an orderly way. Making sure that the assets of the firm are secured provides the best outcome for investors.”
The Sunday Times, which first reported the story, said concerns about the company were passed to the FCA’s former chief executive Andrew Bailey by a campaigner in 2019. Bailey has since become governor of the Bank of England.
Raedex is owned by Reginald Larry-Cole, who also owns PayGo Cars, Triple R Lifestyles and Regnata Dreams.
He has previously tweeted about the virtues of a business model that he said offers consistent returns while helping frontline workers.