FCA - Debt management firms must raise their game

FCA - Debt management firms must raise their game

Butterworths Financial Regulation Service is written by a team of experienced and well known authors comprising practising lawyers, regulators and academics, and provides detailed, authoritative analysis and clear, practical guidance on the UK financial regulatory system.  covering the general principles and rules of financial regulation, as well as an indepth look at specific types of regulated business.

In this excerpt from the Financial Regulation Service October Bulletin (FinReg Bulletin No. 141) Victoria Raffe, Director of Authorisations at the FCA, comments on how debt management firms will be assessed, particularly those that pose a higher risk to consumers:

‘These firms are advising consumers who have often reached rock bottom, so it’s important that firms get it right. Many firms are falling well short of our expectations and they will need to raise their game if they want to continue operating.’

The process for authorisation will be more rigorous than the previous Office of Fair Trading licensing regime. The emphasis is on creating a sector that works well for both firms and consumers. The FCA expects all debt management firms to meet required standards, including:

  • a business model where customers benefit fully from the service offered, and fees are fair and transparent;
  • providing suitable advice that takes into account a client’s circumstances and for debt solutions to be appropriate, affordable and sustainable;
  • advice to be provided by trained staff whose interests are in getting the best outcomes for the customer, rather than driven by incentives;
  • appropriate systems and controls that will protect client money;
  • notifying the FCA if they have obtained a book of customers from a firm or a legal entity undertaking debt management; and
  • telling customers about free debt services and signposting them to the Money Advice Service for more information in their first communication with the customer.

The FCA has conducted targeted firm visits and has found that many debt management firms are failing to adequately follow the consumer credit rules brought in to provide additional protection for consumers in April.

Since April:              

  • the FCA has issued final notices against two firms who have had their applications refused;
  • seven firms’ bank accounts have been frozen to protect client money;
  • two firms have entered administration;
  • one firm is closed to all business;
  • 14 firms have agreed to stop taking on new business;
  • seven firms have been directed to appoint a ‘skilled person’ to report on the firm’s compliance with FCA rules;
  • a further firm has cancelled its interim permission and will no longer provide debt management services; and
  • the FCA is also investigating a number of other debt management firms and individuals.

The application periods for firms with interim permission starts in October 2014.

Want to Subscribe?

For further information or to subscribe to the Butterworths Financial Regulation Service contact the LexisNexis Customer Services Department quoting ISBN 9780406941312 on:

Tel: +44 (0)84 5370 1234

Fax +44 (0)20 8662 2012

Alternatively Email: customer.services@lexisnexis.co.uk


Latest Articles:
About the author: