LONDON (Reuters) - A money lender faces up to two years in jail in Britain after being found guilty of illegally preying on often vulnerable people by threatening to take away their homes if they failed to repay debts, in the first such case brought by the regulator.
A London jury on Thursday found Dharam Prakash Gopee guilty of acting as an unauthorised money lender between August 2012 to December 2016 because he did not have a consumer credit licence or regulatory authorisation.
It is the first time the Financial Conduct Authority (FCA), which is cracking down on the payday lenders and has introduced a cap on high interest rates, has criminally prosecuted an individual for unlicenced consumer credit lending.
Gopee struck 147 credit deals worth more than 1.0 million pounds ($1.4 million) in total over four years and collected on pre-existing loans at high rates of interest, registering charges on people’s properties and pursuing court actions when people could not pay, the FCA said.
Prosecutors dismissed arguments that he was not entering into credit agreements directly with consumers, alleging that his complex new type of lending agreement was a “work of fiction”.
The FCA said consumers appeared to sell their properties - sometimes for as little as 2,000-5,000 pounds - to one of Gopee’s companies.
Another of his companies then purported to loan the purchase money to the first company to finance the transaction. People were given a licence to remain at their property as long as they paid the monthly fees, the regulator said.
“Unauthorised money-lending is a criminal offence and causes serious harm, often to vulnerable communities,” Mark Steward, the FCA’s head of enforcement and market oversight, said.
“Mr Gopee’s actions showed utter contempt for the law. The FCA will continue to take whatever action is necessary to stop this misconduct.”
The FCA is expected to introduce new rules to protect consumers in Britain from high-cost credit companies such as doorstep lenders and household appliance rental firms after a review of the consumer credit market.
The watchdog, which said in January that its review had demonstrated an “emerging picture of the case for intervention”, expects to publish its conclusions and proposals this quarter.
Gopee was disqualified as a director for 15 years in May 2016 and last year, winding up orders were made against 14 companies operated by him in separate proceedings.
He will be sentenced on February 9. Carrying out unauthorised business is a criminal offence in Britain that carries a jail term of up to two years, a fine or both.
($1 = 0.7135 pounds)
Editing by Jane Merriman