The Financial Conduct Authority (FCA) has written to the chief executive (or equivalent) of all debt management firms it regulates. The FCA is concerned that some firms are not carrying out annual reviews of customers’ Debt Management Plans (DMPs), as required under FCA rules, and that other firms are not carrying out these reviews to the correct standard.
Firms must review all their DMPs at least annually, and also whenever they become aware of a material change in a customer’s circumstances.
A review must include a re-assessment of a customer’s financial position – income, capital, expenditure and other personal circumstances. The firm must then consider carefully whether the DMP remains suitable for that customer. If the firm concludes that the plan is still suitable, it must then inform the customer of the reasons why it believes the debt solution is still appropriate.
Where an annual review is conducted via telephone, a summary of the review must be sent to the customer in written form.
If a customer does not co-operate with a firm’s initial attempt to carry out an annual review, the firm cannot just accept the customer’s wishes and not carry out any sort of review. Firstly, the firm should attempt to persuade the customer to engage with the review process. If these attempts are unsuccessful, and the firm cannot then be confident that any debt management solution remains suitable for the customer’s circumstances, then it must give serious consideration to terminating its agreement with that customer.
Where a DMP is terminated, firms must pay any sums due to the customer as soon as practical.
The letter was also accompanied by a warning that the FCA could take action against firms that fail to comply with their obligations in this area – for example the regulator could impose a fine and/or a ban on the firm, or on some of its senior management. Debt management firms that currently hold interim permission, and for whom the FCA is still considering an application to upgrade to full permission, were also warned that any failure to carry out the reviews to the required standard could affect the chances of their applications being accepted.
All debt management firms should review the content of the FCA’s letter, consider carefully whether any changes need to be made to their practices and procedures, and seek professional advice from their compliance consultant if they are unclear as to what their obligations are.
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.