CP21/30: Debt packagers: proposals for new rules

Read CP21/30

Why we are consulting 

Our proposals aim to reduce the risk that consumers receive non-compliant debt advice that is biased towards debt solutions which may not meet their needs but generate referral fees for the debt advice firm.

If consumers do not receive advice which meets our standards, they may end up on unsuitable debt solutions. This may lead to them making payments they cannot afford or missing out on more suitable solutions.

We want debt advice firms to provide a high-quality debt advice service to consumers, which supports their recovery and helps them to access a suitable debt solution. This proposal is an important step to achieving this outcome.

Who this applies to 

This consultation applies to debt packager firms and appointed representatives who act as debt packagers. It will also be of interest to:

• Individual Voluntary Arrangement (IVA) and Protected Trust Deed (PTD) providers and insolvency practitioners
• firms administering Debt Management Plans (DMP) and/or the Debt Arrangement Scheme (DAS)
• not-for-profit debt advice providers (NFP)
• consumer groups

Background 

Debt packagers are authorised, commercial firms that provide debt advice services but do not provide debt solutions themselves. The business model relies on generating income from referral fees by passing customers onto certain debt solution providers.

These solutions can help consumers to deal with their debts, but they can also be harmful for people who are not able to afford the repayments, or where another solution may be more suitable.

We set out concerns in 2018 and 2020 around the quality of advice provided by debt packagers, but our recent supervision work has identified further issues. We found that businesses are often set up to resemble a sales process, rather than advice process. 

Our proposals aim to address the concern that debt packagers are not able to manage the strong conflict of interest in the business model, leading to firms not complying with our current rules. This creates an unacceptable risk of harm to consumers. 

Next steps

This consultation has now closed. We will publish feedback on responses and issue a Policy Statement once we have reviewed your comments.