FCA puts the spotlight on debt management firms

[Legal Beagles]

The Financial Conduct Authority (FCA) has today published its second thematic review of the debt management sector, looking at commercial and not-for-profit firms that provide debt advice and administer debt management plans to help customers deal with their debts.

https://www.fca.org.uk/news/press-re...nagement-firms

[Amethyst]

Report

https://www.fca.org.uk/publication/t...ews/tr19-1.pdf

Two of the smaller firms reviewed by the FCA had unacceptably poor standards and practices. For example:

• One firm failed to identify an 87-year-old widow on a 95-year debt management plan as vulnerable, despite her telling the firm several times that she had difficulty with technology and with figures and paperwork. The firm’s advisers talked over her, pushed her to sign documents online and refused to help her when she was clearly distressed.
• Another firm collected unaffordable payments from a vulnerable customer for 6 months, despite having been told that the customer was struggling financially and had had to give up work after being diagnosed with cancer.

Expansion of the 87 year olds case study

Case study - treatment of vulnerable customers

The customer was an 87-year old widow on a debt management plan with the firm, with an estimated length of 95 years. The customer’s late husband dealt with their finances throughout their marriage. The customer told the firm over several phone calls spanning a period of 18 months that she didn’t have a good memory and struggled with figures and paperwork. She was also very uncomfortable using technology. The customer had also been very unwell, and in several calls was unable to recall recent conversations with the firm and was often apologetic. The firm did not record any of this information on its systems to flag that the customer was potentially vulnerable, and during calls talked over the customer and pushed her to sign documents online.The firm later attempted to conduct an income and expenditure assessment with the customer as part of its review of the debt management plan. The customer found the assessment difficult as she was unable to recall a lot of her expenses or the amounts.Soon after, the customer called the firm as she had received a call from a debt purchaser which had acquired one of her debts, and didn’t know what to do. The customer was clearly distressed and confused during the call, telling the firm that it was too much for her to deal with and asking the firm for help. The adviser refused to help her. We felt the firm failed to treat the customer fairly throughout these events, and failed to identify and appropriately respond to the customer’s vulnerability. We felt the firm’s insistence on using digital technology and refusal to help the customer were particularly poor conduct.

[Amethyst]

ANother couple of the big issues we see....

Often customers seeking debt advice about their consumer credit debts have other problem issues such as housing, welfare benefits and actions by priority creditors, and these could be urgent. However, in cases where we observed firms were not able to provide appropriate advice on such issues they did not meet their obligations under CONC 8.3.7R(4) to then refer those customers to another advice provider.

Consequences of stopping contractual payments

Our rules in CONC 8.3.4R(3)(b) and 8.6.2R require firms to make clear to customers the actual or potential consequences of not continuing to make contractual repayments to their creditors. 4.64We found examples of advisers recommending to new customers that they stop making the contractual payments towards their debts, including customers who had yet to miss payments, without warning of the potential consequences.