FCA takes enforcement action against debt management firm

In its second thematic view of the debt management sector, the FCA said two thirds of the firms it looked at still needed to make improvements and revealed details of two of the worst cases it saw.

The regulator found that 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 investigation found that 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 six months, despite having been told that the customer was struggling financially and had had to give up work after being diagnosed with cancer.

The review also found that other firms routinely failed to consider or discuss what debt solutions are available and suitable for each customer individually.

The FCA says the sector has "changed considerably" under FCA scrutiny since it took over responsibility for regulation of consumer credit in 2014.

Of the 311 commercial firms offering debt management plans that applied for authorisation to continue under the FCA regime, only 39 – about one in eight – subsequently achieved this.

Jonathan Davidson, executive director of supervision, retail and authorisation at the FCA, 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.”