The FCA recently announced that it has written to five debt packager firms identifying “significant concerns over their practices”.
The five companies have now stopped providing regulated debt advice until further notice, with the watchdog using its formal powers to remove another company’s permission to give advice.
Debt packager firms advise consumers on how to deal with their debts, often referring them to an Insolvency Practitioner or debt management firm, for which they receive referral fees.
Both the FCA and the Insolvency Service have been concerned that these fees can be “many times higher” when the firms refer consumers to an Insolvency Practitioner potentially to enter into an Individual Voluntary Arrangement (IVA), or Protected Trust Deed (PTD) in Scotland, than for other debt solutions.
Together with the FCA and other partners, the Insolvency Service is working to better protect consumers who need debt advice, and their creditors, to ensure that only fair and reasonable payments are charged for work.