The leasing arms of banks and also Shire Leasing have come under further pressure arising out of the ads and services-for-leases debacle with revelations that the government, as well as fraud officers, have launched multiple investigations into the scandal that has rocked the British leasing industry.
Leasing Life has learned that the Department for Business, Enterprise & Regulatory Reform (BERR) has launched an investigation into one of the ads-for-leases scandals – to do with supplier Lifestyle TV Ltd – after having been referred the case by detectives in south Manchester.
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Trading standards officers in Manchester are also investigating Lifestyle, as well as leases brokered by Shire. Meanwhile, it emerged last month that yet another supplier with which Shire Leasing has been linked – Norfolk-based Business Telecom Ltd – is at the centre of a fraud investigation by trading standards officers in Norfolk.
Facing legal action
Shire Leasing already faces large sums in bad debt as it renegotiates deals with customers refusing to pay lease rentals on deals they signed up to with other suppliers.
Besides Lifestyle and Business Telecom, customers of Global Telecoms & Technology Limited are considering bringing legal action against Shire over leases it signed with them, while Shire has instructed the UK’s fifth-largest law firm, DLA Piper, to fight any potential claims.
ING Lease UK and Bank of Scotland Equipment Finance have reassigned to Shire a number of deals linked to some of these suppliers.
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By GlobalDataLifestyle TV Ltd is accused of falsifying signatures on contracts and inducing at least 100
hairdressers across Britain into signing leases through promises of advertising revenue that largely did not materialise.
It has also emerged that lawyers are considering bringing claims in relation to Lifestyle against Lombard and Bank of Scotland Equipment Finance, which financed kit
supplied by the supplier, under the Consumer Credit Act 2006 and the Unfair Contracts Terms Act 1977.
One source said: “There are possible claims under consideration against the banks or financiers as the lease contracts are with them.
“If you are looking to make them unenforceable that’s where you need to go with it. There are possible secondary claims against the brokerage involved if a customer requires compensation flowing payments made to date.”
The source said that it is the duty of the lenders to make sure the contracts are “competent and capable and are the contracts you are entering into”. It is not enough for the lender to say that “we’ll leave it to the brokerage, there has to be an audit trail flowing through”, the person added.
Under investigation
Last month, Lifestyle TV Ltd was found liable by Bristol County Court following allegations – brought by a Bristol-based hairdresser – levelled against it of non-supply of goods and fraudulent misrepresentation. Following the court action, the case was referred to detectives in Manchester for further investigation.
Detectives in south Manchester said it had referred the fraud claims to the companies investigation branch of the Department for Business, Enterprise & Regulatory
Reform.
Meanwhile, Lombard is believed to have widened its fraud investigation into the Lifestyle contracts after it began an inquiry in April.
Shire Leasing told Leasing Life last month that, before signing up Lifestyle’s customers, it “investigated the background of the shareholders and directors and found nothing to cause concern”.
“Products were also assessed and meetings with their senior management conducted. There was no industry feedback that they had conducted themselves in any negative manner,” it added.
Shire also said that it “has one of the most stringent dealer approval processes in the UK market and is constantly improving that process”.
Lifestyle, which is believed to be in financial difficulties, is also accused of falsifying signatures on its own documents as well as the lease contracts.
Commenting on the forgery allegations in the Lifestyle case, a source said: “Investigators are looking at contracts flying around that haven’t been signed by the salons and which were signed by representatives of Lifestyle TV. The signatures were not even close.”
Lombard, which has already launched its own fraud investigation into the Lifestyle contracts, and also Bank of Scotland are believed to be advising clients to refer their
claims to the police.
Further fraud allegations
Elsewhere, Shire Leasing faces yet further problems as a major new fraud investigation was launched last month into other leasing deals brokered by the asset finance intermediary on equipment supplied by Business Telecom Limited. This Norfolk-based company is the subject of a major fraud investigation by Norfolk trading standards.
Investigators are believed to be looking into claims that Business Telecom – on whose equipment Shire brokered around 1,000 leases over a 10-year period – signed customers up to leases of telephone equipment after falsely claiming it was necessary for them to do so under new legislation.
It is also alleged that the value of the leases far exceeds the actual value of the equipment.
Some customers of Business Telecom are now refusing to pay their lease rentals to lessors and have entered into negotiations with Shire Leasing, which brokered the underlying transactions.
A Shire spokesman said last month that it had been contacted by Ofcom on the Business Telecom matter.
One lessee – a school, believed to be based in Hertfordshire – claims it was led to believe by Business Telecom that it was signing up to a 12-month lease of telecoms equipment worth £3,000 and that this would be paid for by a government grant, according to documents seen by Leasing Life.
The school has subsequently sought to rescind the agreement after it discovered that it was liable for £25,000 on a lease term of 87 months, it claims.
Also, Hertfordshire trading standards is investigating whether another company, BTS Digital – which is also known as Business Telecommunication Systems – has in the
past carried out a scam similar to the alleged Business Telecom one.
A source at Hertfordshire County Council said it is investigating complaints against Hatfield-based BTS Digital brought by companies and schools.
Shire said it has never signed leases with BTS Digital.
Meanwhile, customers of Global Telecoms & Technology, who have formed an action group called Give Me Back My Money Limited and hired law firm Nesbit & Co to bring hundreds of actions against Shire, allege they were led to believe contracts with Global – which entered administration earlier this year – included services as well as equipment.
The costs for customers in Global’s contracts – which are for services and equipment – are for the same value as the leases signed up to with Shire, according to contracts
seen by Leasing Life.
It is also alleged that the value of the equipment is many times less than the amount customers are being charged on the leases.
NACFB code of conduct states that lease brokers must not propose to clients terms and conditions “which are anything other than fair and reasonable”, and that all due diligence to protect their customers’ interests should be undertaken.
Reaching settlements
Shire, which has reached settlements with some of Global’s customers after the broker was reassigned some of the leases, said: “The correct procedures and policies were followed, including Shire Leasing’s rigorous supplier approval process.”
It confirmed, however, that “as a gesture of goodwill” it was “working hard in an attempt to help those customers adversely affected”.
Shire went on to say: “Correct procedures were followed throughout the process, which included members of our team visiting Global and reviewing product details and literature.
“Global’s record with us before they went out of business was that contracts were warranted by Global as fair and relative to market value. Global has referred their customers to us for over six years and we have facilitated over 3,000 contracts. Of these customers, only a small minority have now raised concerns.”
“The invoices we received from Global made no reference to services. Further, Global customers were required to sign documentation from Shire, which confirmed that they were leasing the equipment and again to confirm when the equipment had been received and they were satisfied with it.”
When asked to comment on why a former employee of Global, Paul Darnell, is now working for Shire, the broker said: “To help support us with this, we have retained
specialist telecommunications consultants including a former Global employee to ensure that knowledge of the systems customers have is retained and that solutions can be sought.”
Asked whether it believed it had been the victim of misrepresentation by suppliers, Shire said: “Shire Leasing is not implying that it has been misrepresented by its approved suppliers.
“The complaints raised are in relation to services and additional products, such as advertising. These play no part in our contract and sit outside the arrangement for
the funded asset.”
Commenting on claims that leases in the Global deals are overpriced, Shire said: “The industry relies on the representation made by the lessee that they are happy with
the rental they are being charged for the finished product they authorised us to payout on.”
Brendan Malkin
