Financial Conduct Authority  

FCA takes enforcement action on debt management case

FCA takes enforcement action on debt management case

The Financial Conduct Authority has called for improvements to be made by the debt management sector in its treatment of vulnerable customers, confirming it has commenced action against companies falling short of their standards.

In its second thematic review of the debt management sector published today (March 15) the regulator confirmed it had commenced supervisory action against firms were it found "unacceptably poor standards and practices" and opened an enforcement investigation in one case.

The FCA found one company it reviewed had failed to identify an 87-year old widow on a 95-year debt management plan as vulnerable, despite her telling the firm several times she had difficulty with technology, figures and paperwork.

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The regulator found the company's advisers had talked over her, pushed her to sign documents online and "refused to help her when she was clearly distressed".

The City watchdog reported another company collected unaffordable payments from a vulnerable customer for six months, despite knowing the customer was financially struggling and had to give up work after being diagnosed with cancer.

The FCA reported two thirds of the companies it reviewed in the debt management sector still need to make improvements in its identification and treatment of vulnerable customers.

Despite this, the regulator found performance in this sector was "generally better" than that seen in its first review in 2015, when it found "significant concerns" with the quality of advice being given to consumers.

The review found most firms were reaching the regulator’s standards for "most" of their customers, but all firms had inconsistent practices and some customers had received poor advice and unsuitable recommendations.  

The FCA largely attributed a change in culture at most commercial debt management companies to its regulatory scrutiny and interventions, but noted these businesses did not always fully understand the purpose of some of its rules.

The review also identified a general need for companies to provide better advice to couples, or others seeking help together, and found 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 of 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."

Mr Davidson said those which have focused their culture on what is best for their customers, and not just on compliance, have made the biggest improvements.

He added: "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."