FCA: debt management firms must treat vulnerable customers better
On the plus side, the UK’s financial watchdog found improvements have been made since it carried out its last thematic review in 2014-15.
However, it concluded that two-thirds of firms did not have adequate policies and procedures in place, which meant there were some cases where firms had failed to respond to indicators that a customer could be vulnerable.
The FCA also identified two smaller firms where the standards of debt advice and debt management services were “consistently poor”. For example, one debt management firm had refused to help an 87-year-old widow on a 95-year debt management plan.
In addition, the regulator found another firm was collecting unaffordable payments from a vulnerable customer for six months, despite having been told that the customer was struggling financially and had given up work after being diagnosed with cancer.
The regulator is testing whether firms are currently meeting required standards, if they are treating their new and existing customers fairly and delivering appropriate outcomes, including for vulnerable customers.
The FCA said these failings were symptomatic of a lack of focus on customer outcomes, with behaviours and practices which failed to treat indebted and often vulnerable customers fairly.
It also expressed concerns that the senior management in these firms had failed to direct their business to treating customers fairly or to have a basic understanding of the risks posed by poor debt advice.
The review also identified a general need for firms to provide better advice to couples, as well as individuals who are seeking help together. Some firms routinely failed to consider or discuss what debt solutions are available and suitable for each customer individually.
Jonathan Davidson, executive director of supervision, retail and authorisation at the FCA, said it is vital that consumers needing 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.”