The FCA’s first thematic review in 2015 found significant concerns with the quality of advice being given by commercial providers in particular. Today’s review shows that most customers are getting better advice and outcomes today than was previously the case.
However, whilst firms’ identification and treatment of vulnerable consumers is generally better than at the time of the first review, two thirds of the firms that the FCA looked at still needed to make improvements in this area. The review also identified a general need for firms to provide better advice to couples, or others seeking help together. Some firms routinely failed to consider or discuss what debt solutions are available and suitable for each customer individually.
Two of the smaller firms reviewed by the FCA had unacceptably poor standards and practices. For example:
- One firm failed to identify an 87-year-old widow on a 95-year debt management plan as vulnerable, despite her telling the firm several times that she had difficulty with technology and with figures and paperwork. The firm’s advisers talked over her, pushed her to sign documents online and refused to help her when she was clearly distressed.
- Another firm collected unaffordable payments from a vulnerable customer for 6 months, despite having been told that the customer was struggling financially and had had to give up work after being diagnosed with cancer.
The FCA has commenced supervisory action in these cases and opened an enforcement investigation in one case to date.
Jonathan Davidson, Executive Director of Supervision, Retail and Authorisation said:
‘It is vital that consumers who need help with their debts get quality advice and, if they enter into a debt management plan, that they can afford the payments. We are pleased to see the progress that debt management firms have made in becoming compliant. Those who have focused their culture on what is best for their customers, and not just on compliance, have made the biggest strides.
‘But many firms have more to do, particularly for more vulnerable consumers, and we have also found that a small number still have unacceptable standards and practices – so we are taking action to stop this.’
The FCA has given feedback to firms in the sample for the review. Firms should look at the FCA’s findings and consider the implications for their business; the review includes examples of good and poor practice to help firms understand the FCA’s approach.
The FCA set out on taking over responsibility for regulation of consumer credit in 2014 that firms in this sector needed to raise their game if they wanted to continue to operate, and the sector has changed considerably under FCA scrutiny and regulation. Of the 311 commercial firms offering debt management plans that applied for authorisation to continue under the FCA regime, only 39 – about 1 in 8 – subsequently achieved this.
The FCA also sent a Dear CEO letter in October 2018 to what are known as debt packager firms, which give debt advice but then refer customers to other firms to provide debt solutions, in order to raise the standard of advice provided by those types of firms.
People who are struggling with debt can access free, expert, and independent advice by using the debt advice locator tool(link is external) on the website of the Money Advice Service, which is part of the Single Financial Guidance Body (SFGB)(link is external). The SFGB provides guidance and information about money and pensions, and is an arms-length body of the Department for Work and Pensions.