Norton Finance and Norton Insurance Services have been placed in administration due to the volume of payment protection insurance mis-selling claims against them.
The companies are subsidiaries of Norton Finance Group which continues to trade profitably and is unaffected by the administration.
The group estimated that it would cost the firms £2.2m to deal with PPI claims and as a result it appointed Sarah Bell and Philip Duffy of Duff & Phelps as joint administrators on February 7 2012.
A pre-pack saw another subsidiary, Norton Finance and Mortgages, buy the assets of the two firms from administration.
It operates out of the same building in Rotherham and will retain all the staff of the two firms.
Norton Finance Group claims all creditors will be paid and the administrators are contacting them. But it admits that the PPI liabilities will be dumped on the Financial Services Compensation Scheme.
Keith Stringer, director of Norton Finance Group, says: “It is with reluctance we have had to close these two companies as they traded successfully for 38 years until the regulations on the selling of PPI changed retrospectively last year.
“But I am pleased to announce that Norton Finance and Mortgages has acquired the business and all employee positions will be protected. We look forward to continuing to work with existing introducers and partners.”
The FSCS is the compensation fund of last resort for customers of authorised financial services firms and is funded by a levy on such companies. If the firms default on their liabilities the FSCS will pay affected customers.
As a result of the appointment of joint administrators there is a moratorium on the legal process. This means all consumer PPI claims have been stalled and no new ones can be initiated without the written consent of the administrators or an order from the High Court.