The Financial Conduct Authority (FCA) is writing to 16,000 customers of debt management firm PDHL, which was refused authorisation by the regulator.
The FCA refused PDHL’s application for authorisation in December last year after finding that the firm offered poor quality debt advice and breached various rules including:
- Consumers being advised to enter into debt solutions that were unsuitable for their circumstances;
- The adequacy of PDHL’s systems and controls regarding management information and effective quality assurance.
The FCA was generally concerned about the firm’s treatment of its customers. For example, one customer called PDHL to inform them that they had lost their job. PDHL did not review the case for two months – at which point the firm identified that the customer had negative disposable income.
However, the customer’s request to reduce their minimum payment was not accepted and the customer agreed to maintain payments at the original level.
Another customer with negative disposable income agreed to keep paying the minimum £30 monthly payment under their debt management plan, on the basis that they would borrow money from their mother.
In both cases the debt management plans failed anyway, as the customers stopped making payments to PDHL within three months. PDHL’s interim permission lapsed at 5pm on March 9.
The FCA is still assessing applications for authorisation from all debt management firms with interim permission. There are around 400,000 people on commercial debt management plans in the UK.
The FCA has previously warned it considers the debt management sector to be high risk and told firms they needed to raise their game to become authorised.
More than 100 firms have left the market since applications closed for debt management authorisation in February 2015.
Jonathan Davidson, director of supervision – retail and authorisations, at the FCA, said: “Poor debt advice can lead to consumers trying to make payments on their debt that they cannot afford which is particularly serious for those in vulnerable circumstances and why we have paid very close attention to the advice given to consumers by debt management firms.
“As part of our authorisation process, all firms must demonstrate that they have customers’ interests at the heart of their business.”
Jonathan Davidson will be a keynote speaker at Credit Today’s Credit Summit, on April 7 in London. He also features in an exclusive interview in Credit Today’s April issue.
By Marcel LeGouais