We are undertaking a thematic review of the debt management sector, in line with the commitment in our 2017/18 Business Plan[1].
Debt management remains a priority for us as poor practice by debt management firms poses a high risk to consumers, particularly those in vulnerable circumstances. It is important that we have the best possible understanding of how the market as a whole is working for consumers.
We want to understand how providers across this sector are meeting the needs of their customers, following the FCA’s interventions in the market and other changes since our last thematic review.
We set out in 2014[2] that firms in this sector needed to raise their game if they wanted to continue to operate. Our 2015 thematic review[3] found significant concerns with the quality of advice being given by commercial providers in particular.
Since then, we have refused authorisation to a number of providers while others have left the market. Those that remain have had to show that they meet our threshold conditions in order to be authorised.
We have also undertaken a range of supervisory and other work with debt management firms – for example, we have sent two ‘Dear CEO’ letters to all firms in the sector reminding them of our requirements on annual reviews[4] and transfers of customers between firms[5].
Our current review will be based on a sample of both fee-charging and free-to-customer debt management providers in order to help us build up a full picture of the sector. We will look at the outcomes for customers from the service they are given as well as the initial advice process. We want to understand where there is good practice that is helping consumers to achieve positive results in dealing with their debts, as well as identifying areas for improvement.
Our scoping work for this review has been led by information that we already hold. This includes
- the findings from our previous thematic review
- complaints data
- firm intelligence and information from supervisory contact with firms
- firms’ applications for authorisation, which include descriptions of their approaches to debt management
We will review customer case files and visit providers to interview staff and observe their processes and dealings with customers. We will also make full use of the information we already hold in order to minimise burdens on providers.
We will take appropriate supervisory action if we find that firms are falling short of the standards that we expect. However, the main aim of this work is to assess the sector more broadly.
We expect to complete this review in Q1 2019.