Harrington Brooks is the first debt management firm to agree a redress package since the FCA took over regulation of the sector on 1 April 2014.
Linda Woodall, director of mortgages and consumer lending at the FCA, said: “Debt management customers are struggling financially and often in difficult situations so it’s important that when people are putting their trust in a firm, they get the service they have paid for.
“When things go wrong we expect firms to put them right for their customers and we are pleased that Harrington Brooks is working with us to do this.”
In September this year, Harrington Brooks told the regulator delayed communications with debtor’s creditors left customers thinking the firm had been in contact with creditors when it had not. The delay resulted in some people owing more in interest and charges than if the firm had contacted creditors sooner.
Harrington Brooks has cooperated with the FCA’s requests and will be writing to affected customers in the coming weeks to explain the situation and advise them of any redress due.
Customers do not need to do anything, and should wait to be contacted by Harrington Brooks.
Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said:
“We are pleased to see the FCA take the first of what we hope will be many interventions in the fee-charging debt management sector. The high fees that these profit-driven companies charge only serve to add to their customers’ debts, and in many cases we have no confidence that they are giving people the right advice.
“In this particular case, Harrington Brooks did not contact their customers’ creditors in a timely manner, leading to higher interest and charges than should have been the case. The FCA is absolutely right to take action to ensure redress to those customers affected, and we hope they will receive the money they are owed as quickly as possible.”
In September 2014, the FCA said that it had concerns about aspects of the debt management sector, in particular, that they demonstrate they provide appropriate advice, do not charge unfair fees, and have adequate processes for handling client money.
