Debt management firms to be kept a closer eye on
The Financial Conduct Authority, who took over running things in this area in April, issued its warning as it prepared to authorise up to 200 debt management firms from next month.
The FCA aren't going to give away any names or dish out any figures as to how many companies are under investigation, however two firms have already had their applications refused and seven others have had their bank accounts frozen to protect money from clients.
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”.
Debt management companies are paid by customers in financial palavers, and act as an intermediary and help pay off the customer's bills, depending on the needs and repayment programme set out.
The FCA wanted to be sure that the advice being given by firms wasn't being driven by bonuses or other such incentives. It also wants fees charged to be clear and transparent. This was previously part of the duties of the Office of Fair Trading, but under a change in the rules the FCA is now responsible for consumer credit.
So now, the regulator has also taken control of regulation of payday lenders, and is proposing a cap on lending rates so that no one is taking the piss.