The FCA has issued a press release stating that debt management firms must demonstrate that they provide appropriate advice, do not charge unfair fees, and have adequate processes for handling client money when assessments for consumer credit authorisation start next month.
The press release adds that firms that provide services which pose a higher risk to consumers will be assessed first, including debt management firms, payday lenders, and credit brokers.
The FCA expects all debt management firms to meet the required standards, including:
- a business model where customers benefit fully from the service offered, and fees are fair and transparent;
- providing suitable advice that takes into account a client’s circumstances and for debt solutions to be appropriate, affordable and sustainable;
- advice to be provided by trained staff whose interests are in getting the best outcomes for the customer, rather than driven by incentives;
- appropriate systems and controls that will protect client money;
- notifying the FCA if they have obtained a book of customers from a firm or a legal entity undertaking debt management; and
- telling customers about free debt services and signposting them to the Money Advice Service for more information in their first communication with the customer.
View Debt management firms must raise their game, says FCA, 22 September 2014