06Jul

In June 2015, after pressure from the regulator, the Financial Conduct Authority (FCA), Stockport-based debt management firm PDHL agreed to stop accepting new clients and arranging new debt repayment plans.

A notice on the firm’s website says that the move has taken place “following the recent major expansion of our client base.”

The rest of the website, concerning the services the firm can offer, appears unchanged as of early July 2015.

It is not clear exactly why the FCA has taken this action against the firm.

PDHL is still able to service its existing clients.

PDHL acquired Carrington, Cheshire-based Kensington Financial Management Consultants from Money Advice Group in March 2015. Kensington began to trade under the PDHL brand name following the purchase.

When it published its thematic review of debt management advice in June 2015, the FCA did not name the one firm that participated in the review that has agreed to stop taking new business while it makes significant changes. It is therefore unclear whether this refers to PDHL.

Five of the eight firms that participated in the review are undertaking wide-ranging reviews of past business, overseen by a skilled person. Two further firms are conducting focussed reviews, and these reviews could lead to customers being offered compensation.

The failings identified at some firms included:

• Inadequate assessment of customers’ financial circumstances (e.g. income, expenditure, debts, expected changes in circumstances) before making a recommendation
• Selling additional products to customers, such as packaged bank accounts, but not assessing the impact the cost of these products would have on their ability to repay debts
• Failing to make customers aware that free debt advice is available (this must be done at the start of the business relationship), or discouraging customers from taking this option. The FCA found one example of a firm incorrectly telling a customer that the not-for-profit sector was “owned by the banks.”
• Failing to identify vulnerable customers, or to treat them fairly
• Recommending debt management plans when other alternatives would have been more suitable for certain customers. These alternatives might have included bankruptcy, or Scotland’s Debt Payment Programme, where creditors are required to freeze interest and charges
• Failing to be transparent as to the fees to be charged, or charging fees that are so high that they impair customers’ ability to repay their debts
• Insisting that complaints are put in writing before they can be looked at (which contravenes FCA rules), or informing dissatisfied complainants that they had the right to refer the matter to a trade association (rather than the Financial Ombudsman Service)
• Very low levels of sales quality monitoring, or monitoring that was primarily focussed on adherence to sales scripts rather than delivering good outcomes for customers
• In general, failing to provide adequate resource to their compliance function

The FCA’s annual report for the 12 months to March 31 2015 shows that in this period, 12 consumer credit firms have exited the market. 22 firms have been asked to stop or change their practices, and six customer redress schemes have been launched. 24 debt management firms have been subject to some form of enforcement action.

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.