Nick Pearson, chief executive of The Debt Counsellors Charitable Trust, explains why the FCA’s review of debt advice is a serious jolt for free debt advice providers.
| Nick Pearson, chief executive, The Debt Counsellors Charitable Trust|
As many readers will be aware, on 25th June the FCA published its long awaited and much anticipated “Quality of debt management advice” thematic review.
Naturally, the headlines were grabbed by the research findings in relation to the “unacceptably low standard” of debt advice from fee charging debt advice companies.
This probably came as no surprise to many of us, merely confirming what we already knew, or at least suspected. The phrase “dog bites man” springs to mind.
What received much less, indeed very little coverage in either the trade or public facing media was the FCA’s findings in relation to the quality of debt advice from free to client debt advice providers.
It is unclear from the research how many of the eight providers surveyed were free to client providers but I understand it was 2 providers, both larger organisations offering mainly telephone advice
In summary, the FCA found that 20% of the free sector cases they reviewed “were assessed as posing a high risk of harm to consumers“and “just under half of the free to customer cases were assessed as medium risk” of harm to consumers. This is a real “man bites dog “story.
Until the FCA published its findings, the free sector has been pretty much immune from any sort of criticism; there has been a conspiracy of silence about the quality provided.
The prevailing view was one best typified by the former regulators attitude. The OFT did free providers and their clients a major disservice by adopting a “free debt advice can never give rise to consumer detriment and even if it does, we are not interested” approach.
Many creditors of course have privately expressed their concerns about the low quality of much free debt advice but have been afraid of media/political censure and backlash if they ever had the temerity to say anything publically.
The cat is now well and truly out of the bag! From my point of view it was good to see the FCA having the courage to publish research of this sort; I suspect there was much behind the scenes lobbying to get the report watered down in relation to its findings for free providers.
I would urge the FCA to continue investigating the quality of debt advice from free providers and in particular those predominantly face to face advice services which were grandfathered in to FCA authorisation with only perfunctory scrutiny.
As chief executive of a small, but growing, telephone based free to client debt advice provider I am well aware, as are my staff and trustees, of the need to provide the very highest standards of advice, support and service to clients.
I am sure we are not alone but as Mike O’Connor, chief executive of Stepchange, quite rightly put it, the FCA findings have come as a “wake up call’ to many free providers.
Posted on 27th July 2015 by Marcel LeGouais
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