The Financial Conduct Authority have today released their final report based on the Thematic Review undertaken on “Quality of debt management advice”.
The thematic review took a sample of fee-charging and free-to-customer debt management firms and looked at the quality of debt advice given by each sector.
In summary, the FCA found that advice from our fee-charging industry was of an “unacceptably low standard” and felt that the firms who were included in the sample were not adequately assessing customers’ financial circumstances which could result in a debt solution being recommended that was not suitable for the customer.
Fee-chargers must clearly improve – 60% of advice calls being high risk is absolutely unacceptable.
However, FCA state that nearly 70% of advice given by the free-client sector is high or medium risk. This is the first time it has been acknowledged that free advice can be of poor quality.
David Mond, DRF Chairman says
Whilst the FCA’s thematic review of the quality of debt management confirms what was expected, that many fee-charging debt management companies give poor advice, it also shows the assumption that free to client agencies give good advice is also wrong.
The FCA has now provided feedback to the firms used in the sample, with one agreeing to cease taking on new business while it changed its processes. DRF once again want to stress the importance of the new FCA regulation CONC Rules which can be found here.
David Mond, DRF Chairman continued to say
Britain needs a debt management sector that is fit for purpose. Closer supervision of fee-charging debt management firms is essential but the FCA must now ensure there is a true level playing field in debt management and that they do not lose sight of the need for free-to-client organisations to raise their game as well.
The full thematic review response can be found on the FCA’s website here.
DRF continues to assist their members with compliance related queries and have encouraged them to familiarise themselves with the findings when reviewing their own in-house compliance.