FCA reveals action against 30 debt managers so far
As of late October 2014, action of one type or another has been taken against more than 30 debt management firms since the Financial Conduct Authority (FCA) took over as regulator of consumer credit on April 1 2014.
Two firms have had their authorisation applications refused. Seven firms have seen their bank accounts frozen – these include Gregson, Brooke Financial Services, One Tick and the Money Management Service.
Seven more have been forced to appoint a “skilled person” to conduct a Section 166 review. The FCA commissions such a review when it has concerns about one or more areas of a firm and wants to gather additional information as a result.
14 firms have ‘voluntarily’ exited the debt management sector. However, these firms include Debt Help & Advice and its affiliate company First Step Finance, which had previously been the subject of action by the former regulator, the Office of Fair Trading.
The FCA has consistently said that it would regard debt management firms as high risk, and has warned these firms to expect close scrutiny.
In late September 2014, just days before the application period for debt managers to apply to the FCA for full permission commenced, the FCA issued a general warning to the sector regarding its compliance standards. Areas of concern identified by the regulator included:
- The suitability of advice given
- The levels of staff training and expertise
- Whether staff are motivated by financial incentives, or by securing the best outcome for their customers
- Whether fees are fair and transparent
- Arrangements for protecting client money
- Whether firms are meeting their obligations to refer customers to sources of free debt advice, and to make them aware of the Money Advice Service.
Regarding client money, new rules were introduced in April, and it is understood that some firms have not been passing on payments received from customers to their creditors, while others are failing to hold client money in separate bank accounts.
All commercial debt adjusters will need to have upgraded their limited permission to full permission by March 31 2015 at the latest (the deadline is as early as the end of 2014 in certain geographical areas). But the need to comply with FCA regulations and principles already applies – it is not acceptable to wait until full authorisation has been received before embracing the new regime.
Victoria Raffe, director of authorisations at the FCA, said:
“[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][Debt management] firms are advising consumers who have often reached rock bottom, so it’s important that firms get it right. Many firms are falling well short of our expectations and they will need to raise their game if they want to continue operating.”
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[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]