Following the transfer of consumer credit regulation to the FCA in April 2014, a number of debt management firms have left the market. Existing debt management firms are currently in the process of applying for authorisation from the FCA, where the regulator will check that firms meet its standards.
Firms that provide services which pose a higher risk to consumers will be assessed first, including debt management firms, payday lenders and credit brokers.
Victoria Raffe, director of authorisations at the FCA, said:
"These firms are advising consumers who have often reached rock bottom, so it’s important that firms get it right. Many firms are falling well short of our expectations and they will need to raise their game if they want to continue operating."
While it is not known whether further firms may leave the market, the Money Advice Service has put in place a prudent contingency plan to help any affected clients who may otherwise be left without a debt management provider.
To ensure that those customers affected have access to impartial debt advice, the Money Advice Service is funding StepChange Debt Charity to set up a special service to provide free advice and support over the phone.
Caroline Siarkiewicz, Head of the UK Debt Advice Programme for the Money Advice Service, commented:
“We welcome the FCA’s increased scrutiny of debt management companies, bringing greater accountability, making sure all providers meet the same standards of advice delivery and protecting consumers.
“It is important that those customers whose debt management company leaves the market are able to access high quality, free debt advice to help them decide the best course of action and get their finances back on track.
“This is the first time we have worked in partnership with StepChange Debt Charity and we are pleased to be providing funding to deliver these vital additional debt advice services over the coming year.”
Mike O’Connor, Chief Executive of StepChange Debt Charity, added:
“We are delighted to be working in partnership with the Money Advice Service. Dealing with debt can be an extremely stressful and difficult time and it is essential that the people affected by firms leaving the market have somewhere to turn where they can get free and independent advice.This funding means that substantial extra advice and support will be available in the coming months.”
