In February 2023, the FCA announced that it would progress previous proposals to ban debt packager firms from receiving referral fees from debt solution providers, following further analysis of the market that it had carried out.
The FCA had initially consulted on a fees ban in November 2021 after identifying a lack of adequate management of the conflict of interest between giving advice in the customer’s best interests and recommending an option that would make the firm more money. Following analysis of the feedback the FCA received to that consultation, it decided to gather additional evidence from the debt packager market to supplement its existing evidence base.
A further short consultation, CP 23/5, which closes on 2nd March 2023, will allow the FCA to update its analysis of the market by giving stakeholders the opportunity to comment on the proposed ban of referral fees and to provide insight on any new developments in the market.
If the proposals are implemented, the measures would end the current debt packager business model and this change may come in after a short implementation period.
Firms representing two-thirds of the market in customer numbers have either left or suspended their activities since the FCA first raised concerns in July 2021 (see https://www.fca.org.uk/news/press-releases/fca-takes-action-against-debt-packager-firms for more details of this).
The FCA also proposes to clarify how unauthorised businesses (lead generators) that source potential customers and to recommend a particular debt solution provider to them for advice may need to be authorised by the FCA. The proposed perimeter guidance makes it clear that to pass consumers to a solution provider that offers only one solution could constitute the regulated activity of debt counselling, depending on the circumstances of the individual case.
Thistle Initiatives has supported brokers to financial advisors for over 10 years as a trusted compliance and regulatory advisor. In addition to assisting you as and when our team of specialists can serve as your right hand in a meeting and complying with regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.
Has anything discussed in the article raised questions you want answered? Contact our specialist credit team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to info@thistleinitiatives.co.uk.