Stockport-based debt management firm PDHL Ltd has been stripped of its interim permission by the Financial Conduct Authority (FCA), and had its application for full permission refused. The media are describing PDHL as the largest firm to date in the consumer credit sector to be refused authorisation by the regulator.
The main issues of concern to the FCA were the suitability of advice given by the firm; and its level of human resources, both in terms of the number of debt advisers employed and the expertise available at Board level. These deficiencies were identified even though PDHL has been conducting debt management activity under the auspices of the Office of Fair Trading since 2007.
In July 2015, the FCA forced PDHL to stop accepting new business, but did not give its reasons for the decision at the time.
Regarding suitability of advice, a high proportion of customer files reviewed by the FCA did not show that the advice was tailored to individual circumstances, that all relevant options had been considered, that a full income and expenditure analysis had been carried out or that the risks associated with particular debt solutions were explained.
As an example of the standard of PDHL’s debt advice, the regulator cites the example of a customer who informed the firm that he had lost his job, yet it was two months before his case was reviewed, and no revised payment plan was ever agreed. Another customer continued to pay the firm £30 per month under his plan even though the adviser was aware he was borrowing from his mother to do this.
It was also of great concern to the FCA that the firm’s advisers appeared to be unable to identify vulnerable customers.
The firm admitted that it needed 30 debt advisers to adequately service its customer base, however it had only 14 advisers assessed as competent and only two who were able to properly deal with vulnerable customers.
The firm’s board were not considering sufficient management information to allow them to identify and mitigate regulatory risks. The Managing Director, Head of Customer Services, Risk Manager and Compliance Director all left the firm within a short period of time.
In summary, the FCA says it cannot be confident that PDHL could satisfy threshold condition 2D (Appropriate resources) and threshold condition 2E (Suitability).
PDHL initially appealed to the Upper Tribunal, but has now withdrawn this appeal and has accepted the FCA’s findings. The FCA Final Notice refers to a number of areas in which the firm admitted its arrangements were inadequate.
As it does whenever it decides not to authorise a firm that previously held interim permission, the FCA is now writing to the firm’s 16,000 customers advising them that the firm is no longer authorised and informing them of sources of free debt advice.
Jonathan Davidson, director of supervision – retail and authorisations, at the FCA, said:
“Poor debt advice can lead to consumers trying to make payments on their debt that they cannot afford which is particularly serious for those in vulnerable circumstances and why we have paid very close attention to the advice given to consumers by debt management firms.
“As part of our authorisation process, all firms must demonstrate that they have customers’ interests at the heart of their business.”
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.