Call for ‘combined effort’ to safeguard consumers against debt packager companies

FCA approved, debt management firm, MoneyPlus Advice has enthusiastically welcomed the Financial Conduct Authority’s move to ban debt packager firms from receiving referral fees.

MoneyPlus Advice says the proposed regulation will do little to prevent such firms from finding ways to avert these actions therefore, the involvement and support from other professional bodies, such as the Insolvency Service, and Insolvency practices, is essential.

Struggling consumers have long been put in harm’s way by unscrupulous firms pushing people into unsuitable solutions, often to take advantage of the elevated commercial pay-out of Individual Voluntary Arrangements (IVAs), making clear that the debt packager business model is causing real detriment to those seeking help with their debts.

MoneyPlus Advice, which currently supports tens of thousands of customers with their debt, wholly supports the FCA’s push to ensure that all people get the right advice from the right people at the right time however, it acknowledges the clear and ever-increasing gap between the FCA regulated firms and the insolvency firms operating under the Insolvency Service.

Despite the introduction of guidance for Insolvency Practitioners and updating the Code of Ethics, a large majority of the high-risk advertising that MoneyPlus Advice has reported to regulatory and professional bodies has been specific to insolvency solutions and providers, prompting the need for greater safeguarding collaboration within the industry.

Jonathan Mills, Commercial Director at MoneyPlus Advice said “The FCA’s consultation is a wake-up call for the whole industry. For debt packager firms, these proposals should be seen as an opportunity to develop their business model to focus on customer outcomes and customer experience. There may still be a place for these firms in the market if they can adapt and pivot in the right direction.”

“That being said, there is more to do. At MoneyPlus Advice, we’ve been at the forefront of pushing for more oversight on how debt solutions are advertised. As the high-risk, misleading adverts we’ve seen mainly relate to insolvency solutions, these actually fall outside of the FCA’s jurisdiction, so we are keen to see a positive reaction from the insolvency professional bodies to align with this initiative.”

Currently under the insolvency Code of Ethics, debt packagers, or lead providers, are banned from receiving referral fees from debt management companies yet use a workaround of ‘receiving payment for work completed’.

Mills continues: “We are concerned as to how the FCA’s proposals will prevent this continual poor practice without any further action or intervention by the Insolvency Service in the personal insolvency market. We will continue to communicate and support the FCA within this endeavour and remain positive that the outcome will lead to people who desperately need debt support getting fair, consistent, and honest advice.”

Kevin Still Director at DEMSA said “DEMSA agrees with the need for a combined/’joined up’ effort and attended the Insolvency Practitioners Association (IPA) conference at the Lowry Hotel yesterday next to the offices of MoneyPlus. There were presentations from The Insolvency Service, including CEO Dean Beale, and the IPA compliance oversight team. Breathing Space, FCA CP21/30 and Statutory Debt Repayment Schemes (SDRPs) were discussed. Financial promotions were also discussed.”

“The role of the IP exemption with FCA rules is under review, as is whether IP firms may need to be FCA regulated. This needs to happen quickly if the FCA wish to implement the outcome of CP21/30 by April 2022.”

“DEMSA is concerned that firms not operating ‘debt packager’ model may be inadvertently impacted. The draft CONC 8.3 revisions exempt approved money advisers under DAS/DPP in Scotland. Many of the best bits of the Scottish debt relief scheme are being at looked at for England & Wales, where the Accountant in Bankruptcy can distribute client money in Scotland. We want to ensure the FCA CP has adequate time to align RPB activity with changes to CONC 8 otherwise the problem will persist, as set out by MoneyPlus Advice. The consultation on SIP 3.1 (very relevant to the CP) closed on 5/11.”