13Apr

Advisers see fees and levies soar

Many financial advisory firms across the UK have been hit by several recent increases in the fees and levies they need to pay.

Firstly, the regulator, the Financial Conduct Authority (FCA), has seen its costs increase by 8% in a year due to an increase in staff numbers and additional investment in technology. The FCA has also decided that the largest increase in annual authorisation fee will be paid by firms in the A13 fee block – financial advisers that do not hold client money. Advisory firms will therefore see their FCA fee rise by 10.2% in 2015/16, with the regulator justifying these firms bearing the brunt of the increased costs on the basis they received a rebate in 2014/15 after Retail Distribution Review costs were over-estimated.

Although the Money Advice Service’s overall budget for 2015/16 remains unchanged, financial advisers will need to pay 16% more towards the costs of funding this service than in 2014/15.

At the end of March 2015, life and pensions advisers started receiving invoices for their share of a £20 million interim levy imposed by the Financial Services Compensation Scheme (FSCS), the body which protects customers from loss when financial firms cease trading. Many firms reported receiving an interim levy bill of £1,000 or more. The FSCS said it needed to impose the interim levy for 2014/15 as its costs of meeting self invested personal pension mis-selling claims had been larger than expected.

The FSCS had already hit advisory firms with the news that the share of the organisation’s regular levy they will pay in 2015/16 will be much higher. Collectively, life and pensions intermediaries will pay a levy of £57 million, up from £34 million in 2014/15; while investment intermediaries will pay £125 million, up from £112 million.

Furthermore, this financial year will see advisory firms pay a new levy to fund Pension Wise, the guidance service on the new pension freedoms. Advisory firms with annual turnover of £100,000 or more will collectively fund 12% of the cost of providing this service.

One small consolation might be that advisory firms are not expected to see an increase in the levy they pay to fund the Financial Ombudsman Service, the independent complaints adjudicator.

None of these organisations receive any funding from direct taxation, so are dependent on payments from regulated firms to cover their costs. Nevertheless, the head of one of the main trade associations expressed his dismay.

Chris Hannant, director general of the Association of Professional Financial Advisers (APFA), said:

“It is imperative that the FCA gets a grip on regulatory fees. It cannot just present the industry with an ever-rising inflation-busting bill.

“APFA’s 2014 report on regulatory costs shows they represent around 15 per cent of the cost of advice. This is a significant cost to the consumer and reduces access to advice at a time that pension reforms make affordable financial advice ever more important.”

After conducting a survey of member firms in spring 2014, APFA suggested that financial advisory firms are being forced to pass on soaring regulatory costs to the tune of a £170 fee increase for each client.

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.

01Apr

Second charge mortgage sales at five year high

The volume of second charge mortgage lending has risen sharply, and now stands at its highest level for five years.

Data from broker Enterprise Finance, which publishes the Secured Loan Index, show that £75.5 million worth of second charge mortgages (sometimes known as secured loans) were taken out in March 2015. This represents an increase of 13% on the £66.4 million figure recorded in February.

The annual total for the 12 months to March 31 2015 rose by 19% to £799 million.

The average size of loan was £61,347 in March, a rise of 14% since January and a 3% rise on the figure from March 2014.

The majority of borrowers (54%) take out their second mortgage to fund home improvements, while significant numbers continue to take out these loans in order to consolidate other debt.

Harry Landy, a director of Enterprise Finance, said of the figures:

“March’s secured lending activity represents the market shifting up a gear after a solid start to 2015 and shows that demand for consumer credit remains keen.

“Monthly and annual improvements of almost 14 per cent is further evidence that public attitudes to borrowing continue to improve as the economy recuperates to something resembling a clean bill of health.”

The market for these types of loans was badly hit by the credit crunch of the late 2000s, before which there was a highly competitive market and numerous lenders and brokers marketing these loans via television advertising.

Mr Landy does not expect market growth to be significantly affected by the forthcoming introduction of new regulation. However, lenders, brokers and other firms who deal with second charge mortgages need to ensure they are prepared for the introduction of new rules in March 2016.

From March 21 2016, the UK is required to comply with the requirements of the European Union’s Mortgage Credit Directive. This means that the UK regulator, the Financial Conduct Authority (FCA), will force second charge mortgage firms to abide by rules similar to those applying to first charge mortgage firms (the Mortgage Conduct of Business, or MCOBS, rules), rather than those which apply to consumer credit firms (the Consumer Credit, or CONC, rules). Firms will be subject to new requirements such as:

• Carrying out comprehensive checks of current and future affordability, including whether the payments would be affordable if interest rates rose
• Disclosing certain information to the client, both pre-sale and post-sale
• The need for advisers to hold a mortgage advice qualification such as the Mortgage Advice Qualification or the Certificate in Mortgage Advice and Practice
• Providing more comprehensive data to the FCA via regulatory returns

Firms who offer secured loans can now apply to the FCA for regulated mortgage permissions.

Christopher Woolard, the FCA’s director of policy, risk and research, spoke of the need for additional regulation of this market by saying:

“We recognise that second charge mortgages are beneficial for some customers but we are concerned that consumers can be put at risk by poor sales practices and ineffective affordability assessments. Given the risk of consumer detriment, we want to embed good practice and we believe that applying our mortgage rules is the best way to do this.”

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.

06Mar

RBS announces loss as it is hit by litigation and compensation costs

 

The costs of paying customer compensation and regulatory fines have led to Royal Bank of Scotland (RBS) announcing a loss of £446 million for the first three months of 2015. Its losses in 2014 were £3.5 billion.

 

The banking group, which includes NatWest and Ulster Bank, was forced to set aside £856 million in the quarter to cover ‘litigation and conduct’ issues. This figure includes £334 million to pay costs related to rigging of the foreign exchange markets, an additional £100 million to cover claims for mis-sold payment protection insurance (PPI) and £257 million to cover mis-selling of investments and packaged current accounts.

 

The UK financial regulator, the Financial Conduct Authority (FCA), has fined RBS a number of times in recent years:

 

  • February 2013 – £87.5 million for manipulation of the LIBOR lending rate
  • July 2013 – £5,620,300 for failing to report wholesale market transactions in the correct manner
  • August 2014 – £14,474,600 for deficiencies in its mortgage advice
  • November 2014 – £217 million for manipulation of the foreign exchange market
  • November 2014 – £42 million for IT systems failures

 

As of May 2015, RBS’s total provision for PPI compensation is £3.3 billion, while its reserves for mis-sold interest rate hedging products (IRHPs) and associated administration costs stands at £750 million.

 

Like all major high street banks, RBS has mis-sold a number of products in recent years. General criticisms made of banks concern products such as:

 

  • PPI – designed to cover loan repayments if the borrower was unable to work. This insurance was routinely sold to customers without their knowledge or consent, or to those who did not need it or could not make a claim
  • Card protection products – designed to protect the customer against fraudulent use of their bank card, but in most cases the customer would not have been liable in any case
  • Mortgages – a series of issues in this area, such as selling interest only mortgages to customers with no repayment plan, and conducting insufficient affordability assessments
  • Packaged current accounts – these involve the customer paying a monthly fee in return for certain insurance policies and other benefits which are provided as extras with the account. However, some customers were ‘upgraded’ to a packaged account without their knowledge, while others did not need the insurance or could not claim
  • IRHPs – designed to protect business customers against rises in interest rates, but instead left them saddled with significant policy fees when rates did not rise
  • Investments – often sold to customers without a proper explanation of the associated risks

 

Latest complaints figures from the FCA (covering all firms) show that there was a 22.5% rise in the number of complaints being made about current accounts in the second half of 2014, when compared to the first six months. Complaint numbers in most other areas, including PPI, were down.

 

In most cases, complaints can still be made about sales of these products, regardless of when they were sold. The Financial Ombudsman Service (FOS) will consider any complaint from an individual customer or small business provided it is less than three years since the customer should have become aware of a problem with the product. In most cases, the procedure involves complaining to the provider, then referring the complaint to the FOS if the customer is dissatisfied with the way the firm has resolved the complaint.

 

A formal redress scheme was put in place for IRHP complaints, but many customers who bought these products were excluded from this scheme. They can still make a complaint to the bank, and then to the FOS if necessary. A formal redress scheme was also put in place for card protection products.

 

The UK Government still owns 79% of RBS following its bailout in 2008. Speaking before the General Election, Chancellor of the Exchequer George Osborne MP told the Financial Times his Government wanted to “get rid of the stake as quickly as we can”. Now that a Conservative government has taken office, with Mr Osborne remaining as Chancellor, it remains to be seen what progress can be made in this area.

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.

05Mar

Advisers warned over use of webmail accounts

Experts from both the compliance and IT industries have expressed their concern after it was revealed that 9% of financial advisory firms in the UK were using a webmail account as their main company email address.

Research by business intelligence agency Matrix Solutions found that 427 of the 4,945 firms surveyed were using an account from a web-based provider such as Googlemail, BT Connect, Yahoo or AOL. These accounts are generally thought to be much less secure than specialist business email accounts.

Even if the main firm email account is not a webmail account, some firms may have individual advisers who are using webmail for business purposes, especially if the advisers operate remotely and/or on a self-employed basis.

Firms are advised to seek assistance from their IT services provider to put in place email systems that are as secure as possible. Staff should be trained in data security issues and warned about ways in which the firm could be targeted by fraudsters and scammers.

Gary Williams, director of data protection and data security consultants Protectmydata.co.uk, commented:

“Webmail is about as bad as it can get in terms of security. It bumps up against some of the fundamental security questions firms should be asking themselves: who can see my data, where is it and how long is it retained for? If Yahoo deletes your account, for instance, can you recover it?”

Matt Timmins, joint managing director of compliance consultancy SimplyBiz, said:

“Using webmail to transmit important data and client details is extremely risky. These accounts do not always have the security and controls in place that are needed to safely send and receive client data. They are prone to hacking, identity fraud, cloning and extracting data through robots.”

As well as the central issue of data security, another concern raised by the experts is that clients could be more likely to be duped by a scam if their adviser uses webmail. Scam emails often come from webmail accounts, yet if their adviser also uses one it could make spotting the fake communications all the more difficult.

Sherief Hammad, director of It consultancy NCC Group, said on this issue:

“If you use a webmail domain and one of your clients is approached by someone using another aol.com address, they would not immediately think that was strange. Their ability to understand when something is amiss is diminished. That in itself increases the risk of a security breach because a lot of the new scam techniques play on psychology and the way people interact.”

Mr Williams also advised firms against sending client details via any form of email system.

Firms should also be wary of requests for client data that appear to come from providers. Before replying, firms need to be satisfied that the communication really has come from the provider. They should also ask themselves – should the provider realistically already have this information, and why do they need to ask me for it?

The data security pages on the Financial Conduct Authority’s website give examples of inappropriate use of customer’s data. The regulator cites the following examples:

• Listing answers to clients’ security questions – the questions they must answer when calling the firm – on their monthly statements
• Stating a client’s national insurance number, age, date of birth, and salary on an annual statement
• Sending out promotions which include application forms partially completed with some of the client’s personal information

All of these practices could lead to a data security breach if the communication is intercepted.

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.

02Mar

Fears over effect of Mortgage Credit Directive on mortgage prisoners

There have been reports of a number of lenders not allowing concessions to customers who are trapped on unfavourable rates when applying the affordability criteria under the Mortgage Market Review (MMR), a new set of mortgage rules which were implemented in April 2014. Yet the problem could get worse when the European Union (EU)’s Mortgage Credit Directive comes into force on March 21 2016.

The Directive will insist that the lender carries out a comprehensive affordability assessment for all applicants, and that if they cannot meet the criteria, then their application would be rejected. This would apply even if the deal the customer is applying for is actually cheaper than their current arrangement, and they would therefore be forced to remain on their existing deal. This gives rise to a paradoxical situation whereby the borrower is told ‘you can’t afford this mortgage, so you need to stay on your existing, more expensive mortgage’.

There will be an exception for customers who re-mortgage to cheaper deals with the same lender, but in practice this is unlikely to help much, as a lender has little incentive to offer their current customers more attractive deals.

The present situation under MMR requires lenders to check if the mortgage repayments would be affordable if interest rates rose to 6%, before they grant a mortgage. It does allow lenders to use their discretion for ‘mortgage prisoners’ – those trapped on unfavourable deals as described above. In practice, only a few smaller lenders are actually making use of this facility, but when the Directive is implemented, it will not be available to anyone.

Martin Lewis, founder of the consumer website Moneysavingexpert.com, has announced that he intends to campaign against this element of the Directive. He will meet the EU’s commissioner for financial services, Jonathan Hill; and intends to write to the Financial Conduct Authority’s chief executive, Martin Wheatley; and a Minister from the Treasury in the new UK Government.

A few weeks previously, as part of the General Election campaign, Nigel Farage, leader of the anti-EU United Kingdom Independence Party, told Mr Lewis’ website that the Directive “will … cut many borrowers from the best rates.”

The chief executive of the Ipswich Building Society, one of the few lenders currently offering concessions to mortgage prisoners, also criticised the EU proposal. Paul Winter commented:

“There are almost 800,000 mortgage prisoners across the UK – including older borrowers, the self-employed and those who have experienced life changes. It should not be the case that those who are approaching the end of a deal are forced to continue on a more expensive SVR rate and are denied choice and entry to an otherwise competitive market. We’re calling for a more inclusive approach to mortgage lending.”

Other effects of the Directive will include:

• Second charge mortgages (often known as secured loans) will be subject to a similar regulatory regime as first charge mortgages, including requirements regarding affordability assessments and advisers’ qualifications
• Customers must be given a European Standardised Information Sheet – a new method of ensuring certain important information is disclosed to the customer. This document will replace the existing Key Features Illustration
• Additional regulation for buy-to-let mortgages

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.

20Feb

Personal insolvencies at nine year low

The Insolvency Service has revealed that personal insolvencies in England and Wales in 2014 totalled 99,196, which represents a 1.8% fall from 2013. This is the lowest figure for nine years and the fourth successive year in which the figure has fallen.

It thus seems that the second quarter of 2014 may have been something of an anomaly. This quarter saw a rise of 5.1% in personal insolvency events when compared to the same period in 2013.

Bankruptcies accounted for just 20,318 of the insolvency events, representing a fall of 18.3% compared to the previous year. This is the lowest number of bankruptcies the UK has experienced since 1998.

The number of debt relief orders entered into fell by 3.1% to 26,688.

However, the number of Individual Voluntary Arrangements (IVAs) that were taken out in 2014 bucked the trend. The figure for this type of arrangement of 52,190 represents a 6.8% annual increase. IVAs thus accounted for the majority (53%) of insolvency events in 2014.

A DRO allows those with debts of up to £15,000 and assets of £300 or less and disposable income of £50 per month or less to have their debts and interest frozen for 12 months, and to have their debts written off if their financial position has not improved by the end of this period.

An IVA is where creditors representing at least 75% of an individual’s debt agree to an arrangement whereby the individual’s debts are restructured, on the basis that only a certain percentage of the debt needs to be repaid. It is administered by an insolvency practitioner.

In January 2015, the Government announced plans to increase the bankruptcy threshold to £5,000. At present, individuals can be the subject of a bankruptcy petition over debts as small as £750, with this threshold having remained unchanged since 1986.
At the same time, the requirements for entering into a DRO will be relaxed. The maximum debt that can be covered under a DRO will rise from £15,000 to £20,000; and the maximum value of assets that a DRO holder can have will rise from £300 to £1,000. If the individual owns a vehicle of up to £1,000 in value, then this does not need to be included in the asset limit. The requirement for DRO holders to have no more than £50 per month of income left after essential expenses have been accounted for is expected to remain unchanged.
The Government estimates that 3,600 more people will be able to enter a DRO each year as a result of the changes. It is estimated that the proposals will become law in October 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.

18Feb

Plans drawn up to bring BTL mortgages under FCA regulation

Firms selling buy-to-let (BTL) mortgages will soon have to operate under a new regulatory regime. At present, these types of mortgages are essentially unregulated, unless the borrower intends to use more than 40% of the property as their residence.

However, as with residential first and second charge mortgages, the regulatory landscape for BTL mortgages will change as a result of the European Union’s Mortgage Credit Directive. EU member states are faced with the choice of either applying the Directive to BTL mortgages, or else putting in place an appropriate alternative regulatory system. The UK has chosen to take the latter course of action, and hence financial regulator the Financial Conduct Authority (FCA) issued a consultation paper in early February 2015 on how it plans to regulate the BTL market.

Under these proposals, firms operating in the BTL market (including lenders, brokers and administrators) will need to register with the FCA, although strictly speaking they will not be ‘authorised’ by the financial watchdog. Firms already regulated by the FCA for other activities are expected to be able to follow a simple registration process, which might consist of little more than informing the FCA they intend to carry out BTL activity. BTL firms that are new to FCA regulation will be expected to provide information about the firm’s key personnel, and their criminal records, disciplinary records and skills and competence.

Applications for BTL registration can be considered by the FCA from September 2015 onwards. Initial registration fees are expected to be £500 or less (£100 or less for firms already authorised by the FCA), while periodic registration fees are not expected to exceed £500 for lenders or £250 for intermediaries.

Once registered, firms will be subject to a risk-based supervision programme by the FCA. The conduct standards for BTL firms will include requirements relating to areas such as:

• Provision of information to clients
• Verification of information supplied by clients
• Creditworthiness assessments
• Training and competence
• Calculation of Annual Percentage Rates
• Treatment of clients in arrears

The FCA will have the power to take enforcement action against BTL firms.

Registered BTL firms will need to complete data returns and submit these to the FCA, but the requirements are expected to be less onerous than those of the existing Mortgage Lenders and Administrators Return (MLAR) which authorised mortgage firms need to complete.

Complaints about BTL mortgages will also come under the jurisdiction of the Financial Ombudsman Service for the first time, with BTL firms expected to pay the same case fee as other firms, i.e. £550 per case once the allowance of 25 free cases per year has been exhausted.

Regardless of the EU’s Directive, with the size of the BTL market having grown by a quarter in both 2013 and 2014, many will feel that the introduction of regulation to the BTL sector is highly desirable.

A consultation on the proposed changes has commenced, and firms are invited to submit their views prior to March 19 2015. The new BTL regime is expected to commence on March 21 2016.

The proposed changes will only affect residential BTL mortgages – commercial BTL mortgages will remain unregulated.
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.

12Jan

MOJ Issues Guidance to CMCs on New Complaints Regime

The Ministry of Justice (MOJ) has issued guidance to the claims management companies (CMCs) it regulates ahead of the forthcoming move of CMCs to the Legal Ombudsman’s jurisdiction.

The much delayed plan for customers to be permitted to refer complaints about CMCs to the Ombudsman finally comes into force on January 28 2015. A complaint made before this date can still be considered by the Ombudsman if the company’s final response letter to the customer is sent after the switchover date.

Perhaps the most important step CMCs now need to take is to update their complaints procedures, so that they clearly and unambiguously state that customers can refer complaints to the Legal Ombudsman, once the company has had an opportunity to look into the matter.

Customers of CMCs should be informed of the changes, and the MOJ asks that this is done on the next occasion that the company corresponds with a particular customer. So for example, a written paragraph could be added to all client letters, and a footer to any email sent.

When sending a final response letter, CMCs will need to make reference to the right to refer the matter to the Ombudsman, will need to state the time limit for referring the complaint (this is still to be determined) and will need to give the Ombudsman’s contact details.

The Ombudsman will also look at cases where the company has not sent its final response within eight weeks.

Companies will also need to train their staff regarding the changes.

During an investigation, the Ombudsman may make requests for paperwork or other information about a company’s dealings with the relevant customer, and the CMC will be expected to comply promptly with such requests.

The move will also, in one respect, reduce the powers of the Claims Management Regulator at the MOJ. The MOJ will no longer be able to request that companies apologise to customers or make refunds, as orders such as these will now be delivered by the Ombudsman where necessary. The Ombudsman will have the power to issue legally binding instructions to CMCs, under which they could have to pay up to £30,000 in redress to disadvantaged customers.

The Legal Ombudsman and the MOJ intend to work together under the new regime. For example, the Ombudsman may identify developing trends in the complaints received, and the MOJ may then use this information to take enforcement action against companies.

Fees to be paid by companies for funding the Legal Ombudsman service will be:

  • Turnover of under £5,000 – £75
  • Turnover of £5,000 to £14,999 – £150
  • Turnover of £15,000 to £24,999 – £250
  • Turnover of £25,000 to £74,999 – £340
  • Turnover of £75,000 to £163,636 – £540
  • Turnover of more than £163,636 – 0.33% of turnover up to £1 million, plus 0.22% of turnover between £1 million and £5 million, plus 0.18% of turnover above £5 million, all subject to a cap of £40,000.

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. For more information, visit some of our other pages.

19May

FCA Disclosure Requirements: Meeting the Regulator’s Requirements

The Financial Conduct Authority (FCA) has revealed some negative findings in its latest thematic review into implementation of the Retail Distribution Review (RDR). The study focuses on whether firms correctly disclose charges and other matters at the start of the advice process. The FCA says that 73% of the 113 firms surveyed failed to meet at least one of the requirements regarding disclosing the cost of advice. In the executive summary to its report, the FCA describes this as ‘unacceptable’.

Understanding the Retail Distribution Review (RDR)

The RDR came into force on January 1 2013. Amongst the changes was a ban on FCA-regulated firms receiving commission payments for investment advice. As the only way for these firms to receive compensation firms is through client fees, there is an increased focus on whether companies are explaining the charging structure clearly. Firms often discuss fee charging structures in a client agreement, terms of business letter or other document, which they need to provide on the first occasion the adviser meets a client.

Advice charges might include an initial fee paid at the time the advice is given and ongoing charges paid at set intervals in the future, e.g. annually.

Learning About Common Industry Problems

In 58% of firms, there were issues with the generic cost of advice information provided. 50% of firms were insufficiently transparent as to what costs would be for individual clients. 58% did not give sufficient ‘additional information’, such as that ongoing advice fees may fluctuate. 34% did not clearly describe the nature of the service they offer in return for the fee or did not inform clients of their right to cancel ongoing advice fees.

Separate to the issue of fees, 31% of firms claiming to provide a restricted advice offering were not clearly informing clients about the nature of the restriction.

Wealth managers (financial advisers who give investment advice) and private banks were said to be the worst offenders.

To help businesses, we have created a list of issues firms should remember:

  • When computing fees as a percentage of the investment amount, a cash example should be given, such as what 3% of £80,000 is.
  • When charging fees on an hourly rate, the information provided should include an estimate of the number of hours each part of the service is likely to take.
  • When computing ongoing fees as a percentage of the investment amount, it should clear that this amount will fluctuate in line with the performance of the investment.
  • If the firm has two or more fee charging methods, it should clear whether clients have a free choice among these methods in all circumstances or in what circumstances each method applies
  • It should be clear when ongoing advice charges will commence
  • When the client needs ongoing service, firms must have robust procedures to make sure they deliver advice to the standard promised to the client and at the correct times.

The FCA has already referred two unnamed firms – one financial adviser and one wealth manager –to their Enforcement Division due to issues identified during the review. The FCA warned that more firms might receive possible disciplinary action if the agency does not see improvements by the time it conducts its next study in the third quarter of 2014.

Clive Adamson, director of supervision at the FCA, said he was ‘disappointed with the results,’ and urged firms to improve standards. ‘These results are a wake-up call and we expect the industry to respond,’ he added.

For more information on IFA compliance, send us a message or give us a call at 0845 154 6724.

11Feb

MAS consults on debt advice standards

The Money Advice Service (MAS), an independent organisation set up by government to provide advice on money matters to the general public, has launched a 12-week long consultation on debt advice standards in the UK. Following this consultation it intends to create a single framework for quality standards in the debt advice sector, which would apply to both free to use debt charities and to commercial debt management companies. The latter already have their own codes of practice such as the Code of Conduct of the Debt Managers Standards Association.

Compliance with the requirements of the new framework will be mandatory for all organisations who wish to receive MAS funding. The move is aimed at reassuring customers as to the service they will receive in the future.

MAS assumed responsibility for co-ordinating the debt advice sector in April 2012, and is seeking to improve the accessibility, quality and consistency of advice.

A survey by the Money Advice Trust, a charity which operates the National Debtline service, has previously found widespread differences in how debt advice is delivered and regulated across different organisations.

MAS has three principles which it sees as key to the new framework: being receptive to client needs, demonstrating strong governance and promoting reflective and on-going learning.

The new framework is likely to require role profiles of debt advisers to be much clearer, and to set minimum standards for skills, knowledge and competencies for staff working in the sector.

After the consultation, MAS will finalise the new framework, and from April 2014, organisations which receive funding from MAS will need to demonstrate that they are complying with its requirements. MAS will be able to accredit existing codes of practice and quality standards that meet the requirements of the framework.

Opinions are invited from the debt advice sector on the proposals, and comments can be made via the MAS website until March 15 2013. Alternatively views can be expressed at one of the consultation events MAS will hold across the UK in February 2013.

Caroline Siarkiewicz, Head of the UK Debt Advice programme at MAS, said:

“In the current economic climate, it is vital that debt advice is always of the highest quality. When people look for advice they need to know they can trust what they are hearing and that the right people, with the right training, are helping them. We have seen excellent practice in many parts of the country and today’s consultation is the start of a process to bring the standard across the whole country in line with that best practice.”

Responding to comments that commercial debt management companies already have their own codes of practice, Ms Siarkiewicz added:

“We are conscious the fee-charging sector has its own codes of practice. This framework is not to preclude them but we want them to look at our framework and map their existing standards against our framework.”

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