The Financial Conduct Authority (FCA) has warned the clients of three connected debt management firms to check their debt situation, and to seek advice if necessary.
The three firms – Sterling Financial Security Limited , Haydon Associates Debt Management Consultants Limited and Clear View Finance Limited – are all based in Lichfield, Staffordshire, and all three have had their permissions to conduct debt management activity withdrawn by the regulator.
Sterling, Haydon and Clear View failed to provide the written statements to customers regarding their debt position that the FCA had demanded. 90% of amounts paid by clients were going towards paying the firms’ fees, with only 10p in the pound being used to reduce the debt.
In Supervisory Notices dated March 19 2015, the FCA gave the firms 14 days to provide the following information to clients via written statements:
• The balance owed to each creditor
• The total amount paid to creditors whilst they had been a client of the firm
• The amount the firm was holding on behalf of the client
• The total fees paid by the client to the firm
Furthermore, the firms continued to trade even though their interim permissions expired on March 31 2015, and they had not submitted any applications to the FCA to upgrade to full permission.
Clients of these firms need to note that no redress offer has been made to them, and that they remain responsible for repaying the full amount of their debts. Owing to the amount they have paid in fees, the debts may also be larger than the clients imagined. The three firms are now unable to conduct negotiations on behalf of their clients.
The FCA is attempting to track down clients of the three firms and to make them aware of the debt advice services offered by the Money Advice Service.
Complaints to the Financial Ombudsman Service about debt counselling were 47% higher in the year to March 31 2015 than in the previous financial year. Complaints about fees and charges and the way these were communicated to clients continue to dominate the debt counselling complaints.
The FCA has also previously revealed it is concerned about whether debt management firms have adequate systems in place to protect client money, are providing suitable advice and have sufficiently trained staff.
Back in September 2014, Victoria Raffe, director of authorisations at the FCA, said:
“[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][Debt management] 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.”
All commercial debt adjusters, and all commercial debt counsellors in the Northern region should already have applied to the FCA to upgrade their interim permissions to full permission. Debt counsellors in London must apply before the end of May 2015, those in Northern Ireland and the South and East regions must apply before the end of June, and the final application deadline for firms in the Central region is July 31 2015.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.