Morses Club accounts frozen by FCA over Wirecard scandal
Morses Club said customer accounts at its subsidiary U Account have been temporarily suspended after the Financial Conduct Authority froze the operations of German payments processor Wirecard's UK business.
Wirecard, which filed for insolvency last week, was the card issuer and banking partner for digital current account provider U Account. Morses on Monday said customers could now view balances only.
"This is as a result of direct action on Wirecard's UK operations by the FCA," Morses said, adding that no prior communication was received from Wirecard UK.
"Morses Club has been in communication with the FCA directly to try and understand when a resolution will be found so that their customers can regain access to their own funds."
The company said U Account customers' money is held in a client account with Barclays UK, meaning that these funds are ringfenced and not at risk.
U Account makes up around 2% of Morses Club's total income.
Chief executive Paul Smith said: "We understand the frustration and distress that the requirements imposed on Wirecard UK by the FCA are causing our customers. We are in regular contact with the FCA and Wirecard UK to understand the situation and find a swift resolution for our U Account customers.
"While our customers' money is not at risk, we understand the difficulty this temporary suspension is causing our customers and we are working tirelessly to find a solution."
Wirecard said last week that it was filing an application with the district court of Munich to open insolvency proceedings after announcing a €1.9bn hole in its accounts.
At 0810 BST, Morses shares were down 4% at 47p.
Shore Capital, which cut its rating on Morses shares to ‘buy’ from ‘hold’ following the announcement, said: "Although the customer money is currently ringfenced in a client account with Barclays UK, and hence has not been lost, the inability to access it will no doubt be causing severe distress for U Account customers at a time of increased economic strain caused by the Covid-19 situation.
"It is therefore hard not to imagine that this will have caused irreparable damage to the reputation of the product both from the perspective of existing customers and potential new ones.
"Furthermore, this is not the first problem the group has had with its digital operations, noting the profit warning in March in which the group stated that losses in its digital division had been higher than initially expected.
"Although we could not have foreseen the issue with Wirecard, we have previously expressed concerns about the potential for the group to succeed in the digital space within a non-standard finance setting. Taking today’s news into account, combined with the ongoing uncertainty associated with Covid-19, means that we are uncomfortable with retaining the shares on a buy stance."