Financial watchdog sends warning letter to debt firms

The Financial Conduct Authority, which manages financial organisations in Britain, has sent a letter to debt management companies reminding them of their obligations to their existing debt management customers

 
The letter suggests that firms are failing to make regular checks on customers. Rules are in place within the industry which ensure debt plans are reviewed at least once a year so that customers are getting the best advice for their current circumstances.
 
The watchdog believes that some firms have allowed the plans to run for years without a proper review, meaning a customer's financial situation may have changed significantly.
 
Dear CEO letters have often been a final warning before the watchdog takes action, and the letter, published on the FCA’s website, suggests that companies could be fined.
 
Many individuals manage their debt by paying into a Debt Management Plan (DMP) which then pays funds to creditors to reduce the overall debt. 
 
You can do this by negotiating with creditors yourself, seeking assistance from a debt charity such as Debt Advice Foundation or contacting a commercial debt organisation. 
 
A commercial company will charge you a management fee, typically around 10% to 15% of your monthly payment.
 
Charities do not charge a fee, so the full amount of your monthly payment goes towards paying off your debts. Because there is no monthly management fee to pay, your debts will be paid back sooner than if you used a fee charging company.
 

David Rodger, CEO of Debt Advice Foundation said of the letter;

 
“It is very important that people are getting the right debt solution for them. We thoroughly discuss a caller’s individual situation so that the answer to their debts is a tailored one. 
 
“DMP’s can last for years and can carry charges, so it is therefore vital that a caller’s circumstances are regularly reassessed, so that a new solution can be offered if required. 
 
“The only concern we have is that if callers’ can not be reached they lose their arrangement with their creditors, which can be costly and stressful for those who have been regularly making payments for some time.”
 
If you would like to discuss consolidating your debts into a Debt Management Plan, or would like to know all the options available to you, call our advisers on 0800 043 40 50.