The FCA has taken action following a review into the practices of debt packager firms. 5 firms have stopped providing regulated debt advice until further notice as a result of “significant concerns” over their practices. The FCA has used formal powers to remove another firm’s permission to provide regulated advice.
The action involves “debt packager” firms, which seek out people in debt, offer advice and then refer them on to an insolvency practitioner or debt management company, for which they receive referral fees.
The FCA says some firms appeared to have “manipulated” people’s income and spending and encouraged them to seek individual voluntary arrangements (IVAs) or a Protected Trust Deed (PTD) in Scotland, which can ultimately lead to bankruptcy. The firms appear to have failed to fully explain the risks involved and have provided advice that did not accurately reflect their conversations with consumers or information that consumers had given. In some cases, the FCA’s view is that firms failed to sufficiently take into account consumers’ circumstances and vulnerabilities, including mental health issues and economic abuse.