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FCA writing to 16,000 customers of defunct debt management firm

  • 10/03/2016
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FCA writing to 16,000 customers of defunct debt management firm
The Financial Conduct Authority (FCA) is currently writing to around 16,000 customers of debt management firm PDHL, which has been refused authorisation by the regulator.

When considering PDHL’s application for authorisation, the FCA found that the firm had offered poor quality debt advice and evidence that consumers had been advised to enter into debt agreements unsuitable for their personal circumstances.

There are around 400,000 people on commercial debt management plans in the UK, and the FCA has previously warned that it views the sector as being high risk.

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.”

The FCA also raised concerns about the adequacy of the firm’s systems and controls regarding management information and effective quality assurance.

In one customer example, PDHL failed to review a case for two months after they were informed that the customer had lost their job. Once it had identified that the customer had negative disposable income, PDHL refused a request to reduce the minimum payment which then saw the customer fail to make further payments three months after PDHL had blocked the request.

Since the responsibility for consumer credit was transferred from the Office of Fair Trading to the FCA on 1 April 2014, a number of firms have been operating with interim permissions and are currently being assessed for authorisation. More than 100 firms have left the market since applications closed for debt management authorisation.

In a thematic review published last year, the FCA found evidence that firms were not meeting the standards expected and warned that debt management providers would need to raise their game if they wished to become authorised.

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