15May

Consumer credit and debt management firms should be in no doubt that the Financial Conduct Authority (FCA) operates a considerably stricter regulatory regime than was the case under the Office of Fair Trading (OFT). A number of firms who had operated for many years under the auspices of the OFT have been unsuccessful when applying for authorisation from their new regulator.

The FCA has now refused an application from East London-based Nationwide Debt Consultants Limited (NDC), even though the firm had been offering debt counselling and debt adjusting services since 2008. The firm was granted interim permission when the FCA took over as consumer credit regulator in 2014, but on January 24 2017, the FCA served the firm with notice that it had refused its application for full authorisation. This was largely due to concerns over NDC’s advice standards and record keeping. The firm’s interim permission was cancelled with effect from this date, and it is no longer licensed to carry out debt management activities.

The FCA did not publicise details of its refusal of the application until May 2017.

When first assessing the firm’s application, the FCA identified five main areas of concern:

• NDC did not keep records that were sufficiently comprehensive to allow the FCA to assess whether the firm was giving suitable debt advice
• The firm was not providing information to customers such as details of the actual or potential advantages, disadvantages, costs and risks of each available debt solution; and was not providing annual statements to the standard required by FCA rules
• The firm’s communications regarding the level of fees customers needed to pay to NDC were misleading
• The level of fees being charged meant that many customers were paying more than 50% of their disposable income in fees, which is a breach of the FCA’s rules.
• NDC’s compliance monitoring of advice given was inadequate, and the firm was unable to confirm to the FCA which files had been selected for review

The FCA acknowledges that NDC took action to address some of these issues, but was still not satisfied, believing that “the firm has not been able to demonstrate to the Authority’s satisfaction that it has both fully understood the extent of the remaining deficiencies identified by the Authority and effectively implemented the necessary changes to rectify those deficiencies going forward.”

The FCA’s Decision Notice adds:

“The Authority considers that the firm’s failure to recognise the deficiencies identified by the Authority, and to remedy adequately some of those deficiencies, reflects on the adequacy and competence of the firm’s human resources, including at a senior management level, and on the adequacy of its systems and controls.”

The FCA reviewed some recent sales made by NDC, and says that in many of these cases, customers with low levels of disposable income were required to pay a high proportion of that disposable income in fees, and were recommended debt management plans with long durations that may not have been suitable for their circumstances.

In summary, the FCA says it could not be satisfied that NDC could meet three of its Threshold Conditions: 2C (Effective supervision), 2D (Appropriate resources) and 2E (Suitability).

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.