The UK's Financial Conduct Authority (FCA) has put the spotlight on debt management firms with its second thematic review of the sector.
Image: FCA Supervision retail and authorisations Director Jonathan Davidson. Photo: Courtesy of FCA.
In its second review, the FCA looked at commercial and not-for-profit companies that offer debt advice and administer debt management plans to help customers deal with their debts.
The UK watchdog conducted its first thematic review in 2015 and found several concerns with the quality of advice being given by commercial providers in particular.
The FCA said the latest review shows that most customers are getting better advice and outcomes today than was previously the case.
However, while the firms are generally better at identifying vulnerable customers, nearly two thirds of the firms that FCA looked at still need to make improvements. The review found that companies need to offer better advice to couples or others seeking help together.
Sometimes, the firms failed at identifying suitable solutions for customers based on their unique situations.
The authority cited two examples of firms which failed in identifying certain situations that the customers were facing.
One firm failed to identify an 87-year old widow, who had difficulty with technology, figures and paperwork. Despite the issues, the firm’s advisers talked over her and pushed her to sign documents online and later refused to help her when she was in distress.
Another firm collected unaffordable payments from a customer for six months, despite having been told that the customer was struggling financially and had to give up work after being diagnosed with cancer.
The UK regulator has started supervisory action in these cases and opened an enforcement investigation in one case to date.
Financial Conduct Authority, supervision, retail and authorisation executive director Jonathan Davidson 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. 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.”