In considering PDHL’s application for authorisation, the FCA found evidence that the firm offered poor quality debt advice.
It uncovered a number of failings, including consumers being advised to enter into debt solutions that were unsuitable for their circumstances and the adequacy of PDHL’s systems and controls regarding management information and effective quality assurance.
The FCA was concerned about the firm’s treatment of its customers. For example, one customer called PDHL to inform them that they had lost their job. PDHL did not review the case for 2 months at which point the firm identified that the customer had negative disposable income. However, the customer’s request to reduce their minimum payment was not accepted and the customer agreed to maintain payments at the original level.
Another customer with a negative disposable income agreed to keep paying the minimum £30 monthly payment under their debt management plan on the basis that they would borrow money from their mother. In both cases the debt management plans failed anyway as the customers stopped making payments to PDHL within 3 months.
The FCA is currently assessing applications for authorisation from all debt management firms with interim permission. Firms that were previously regulated by the Office of Fair Trading have been operating with interim permission since responsibility for consumer credit transferred to the FCA on 1 April 2014.
The FCA has previously warned that it considers the debt management sector to be high risk and told firms they would need to "raise their game" if they wanted to become authorised. In a thematic review published in June 2015, it found evidence that firms were not meeting the standards expected. More than 100 firms have left the market since applications closed for debt management authorisation in February 2015.
Jonathan Davidson, director of supervision – retail and authorisations, at the FCA, said:
“Poor debt advice can lead to consumers trying to make payments on their debt that they cannot afford which is particularly serious for those in vulnerable circumstances and why we have paid very close attention to the advice given to consumers by debt management firms.
“As part of our authorisation process, all firms must demonstrate that they have customers’ interests at the heart of their business.”
