You are here: Home - Credit Cards & Loans - News -

Debt management sector to be reviewed amid ‘poor practice’ fears

Written by:
The financial regulator is reviewing the debt management sector over concerns 'poor practice' may be putting consumers at higher risk.

The review, announced by the Financial Conduct Authority (FCA), is looking to understand how providers are meeting consumer needs following a preceding thematic review in 2015, which found “significant concerns with the quality of advice being given by commercial providers”. It also accused debt management firms of “failing Britain’s most vulnerable consumers.”

Since 2015, the FCA said that a number of providers have been refused authorisation while others have left the market. Providers that have stayed in the market have had to provide evidence of compliance with the FCA’s threshold conditions. But, the regulator said that debt management remains a priority as poor practice by debt management firms poses a high risk to consumers, particularly those in vulnerable circumstances.

The review will tackle both fee-charging and free-to-customer debt management providers by examining the outcomes for consumers from the service given as well as the quality of the initial advice process.

In addition to employing existing findings from the previous thematic review, information from firms’ applications, complaints data, and intelligence from supervisory contact with firms – the FCA will also look at customer case files and visit providers for closer observation.

The review announcement comes amidst a series of moves by the FCA to address consumer vulnerability.

Results from the FCA’s Financial Lives survey, released earlier this week, found that half the UK public displayed characteristics of being “potentially vulnerable” – defined as being at risk of suffering disproportionately if things go wrong.

The same report found that only 40% of UK consumers had confidence in the financial services industry. And 13%, or one in eight people who received advice in the past 12 months, believed their financial advisers had at one point given them bad advice.

Earlier this month, in a speech given by FCA chief executive, Andrew Bailey, he highlighted the dangers posed to vulnerable consumers by high cost credit and banks’ lending practices – suggesting that fundamental reforms were necessary to ensure credit accessibility and affordability to the approximately five million Britons experiencing “real difficulties in paying off their balance”.

While the current review will be a broad assessment of the sector, the FCA warned that it will take “appropriate supervisory action” if firms are found to be “falling short of the standards”.

It expects to complete the review in Q1 2019.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

How to help others and donate to food banks this winter

This winter is expected to be the most challenging yet for the food bank network as soaring costs push more pe...

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and the fresh round of walkouts take place tod...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week