Debt management firms have been warned by the financial regulator that they need to do more to help struggling customers.
In a letter written to the chief executives of debt management firms, the Financial Conduct Authority (FCA) told companies that they need to carry out an annual review for customers of a debt management plan (DMP).
The purpose of an annual review is to ensure that any debt payment solutions are suitable for the customer’s circumstances, as well as to keep information about customers up to date so that lenders are not misled about their ability to repay their debts.
But the FCA’s letter states that debt management firms “have been allowing DMPs to continue for a number of years either without reviewing them or subjecting them to a limited review,” and that “this creates a risk because a person’s personal and financial circumstances most likely will change over time”.
The letter adds that any advice given to a customer during an annual review must be provided in a ‘durable medium’ – something that can be recorded for retrieval at a later date.
In addition, the FCA says that if a customer is, and remains, unresponsive about their financial situation, “it may be sensible… to consider lawfully ending its [the debt collection agency’s] involvement in the consumer’s debt plan”.