The UK’s financial watchdog also found another firm collecting unaffordable payments from a vulnerable customer for six months, despite having been told that the customer was struggling financially and had had to give up work after being diagnosed with cancer.
These bad practices have been revealed by the FCA’s second review of the debt management sector.
The regulator is testing whether firms are currently meeting required standards, if they are treating their new and existing customers fairly and delivering appropriate outcomes, including for vulnerable customers.
The FCA said these failings were symptomatic of a lack of focus on customer outcomes, with behaviours and practices which failed to treat indebted and often vulnerable customers fairly.
It was also concerned that the senior management in these firms had failed to direct their business to treat customers fairly or have a basic understanding of the risks posed by poor debt advice and conduct and administer debt management plans.
Some unacceptable standards
The review also identified a general need for firms to provide better advice to couples, or others seeking help together. Some firms routinely failed to consider or discuss what debt solutions are available and suitable for each customer individually.
Jonathan Davidson, executive director of supervision, retail and authorisation, said it is vital that consumers needing help with their debts get quality advice and, if they enter into a debt management plan, that they can afford the payments.
“We are pleased to see the progress that debt management firms have made in becoming compliant. Those who have focused their culture on what is best for their customers, and not just on compliance, have made the biggest strides.
“But many firms have more to do, particularly for more vulnerable consumers, and we have also found that a small number still have unacceptable standards and practices – so we are taking action to stop this.”