Debt plan firms failing the vulnerable, says FCA
http://www.bbc.co.uk/news/business-33267508 Version 0 of 1. Advice provided by some fee-charging debt management firms is "unacceptably" poor, the City regulator has concluded. Examples included a debt plan that would take 125 years to pay off, the Financial Conduct Authority (FCA) said. Debt management firms gather all of a customer's debts and pay back the creditors on their behalf, taking a fee each month. A trade body said individual firms were facing "a tough examination" from the FCA, and scores would shut as a result. 'Last resort' The FCA examined the operations of debt management firms over the course of the year to May to test whether they were treating customers fairly. It concluded that, among firms that charged a fee for the service, "far too many are not meeting the standards we expect". Vulnerable customers were encouraged to buy products and services that were not suitable for them and actually made it more difficult to repay their debts. "People who turn to debt management firms do so as a last resort," said Linda Woodall, of the FCA. "When they find themselves in this position it is vital that they are able to access suitable advice that allows them to make informed decisions about their future." There was also room for improvement among debt firms that took their fee from the creditors rather than the consumer. Shrinking market Free help is available from Citizens Advice, National Debtline and other charities, although some fee-charging firms are not making this clear to customers, according to the FCA. Lesley Robinson, UK debt advice director for the Money Advice Service, said: "This review's findings are clearly disturbing and present a challenge to the debt management sector. "However, we would urge those who are experiencing problem debt not to be put off from seeking debt advice as soon as possible." The Debt Managers Standards Association (DEMSA), which represents some debt management firms in northern England, said any feedback that would improve the service for customers should be welcomed. General secretary Richard Wharton told the BBC News website that firms were facing a tough examination by the FCA in order to be authorised to operate. Every firm has submitted an application to the FCA for a licence, similar to the process being undertaken by payday lenders. They will start to hear whether they have been successful during the coming months. Mr Wharton said he expected the number of debt management firms operating in the UK to shrink from about 200 to "no more than 20 or 30" as a result of this strict authorisation process. He said he was confident that his members, which have a code of conduct, were treating customers fairly. |