The Financial Conduct Authority (FCA) has stopped three debt management firms from offering debt advice services, after it discovered debtors were paying 90 per cent of their monthly payments in fees.
The FCA said the three firms – Sterling Financial Security (Sterling); Haydon Associates Debt Management Consultants Limited (Haydon) and Clear View Finance Limited (Clear View); failed to comply with the requirements that the regulator put in place.
These requirements were that the three firms, which are all based in Lichfield, Staffordshire, should have provided written statements to customers setting out their debt position.
Because of this failure, along with other issues, the three firms are no longer permitted by the FCA to offer debt management services to customers.
The companies will no longer be able to negotiate with creditors on their customers’ behalf or set up new debt management or reduction agreements.
Most customers with debt reduction plans with the three firms have been paying 90 per cent of their monthly payments in fees, leaving 10p in the pound to pay down the debts for an unlimited period of time.
As a result the FCA is now warning customers of all companies to check their debt situation with their creditors urgently, and find out exactly what they owe.
The customers may be left with a debt larger than they expect, even if they have been paying into a plan for some time.
FCA officials are trying to track down customers of the three firms and point them to the Money Advice Service, so that they can seek debt advice and restructure their payment plans. The customers’ current payment plans are effectively unregulated.
The three firms’ interim permissions to provide debt management services lapsed on March 31, but they continued operating after this date, despite not applying for full FCA authorisation.
The FCA is reviewing the authorisation of all firms providing debt adjusting or debt counselling. To continue trading firms are being required to submit new applications.
By Marcel LeGouais