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The Credit Services Association (CSA)
DMC authorisation lapses - contact with "orphan" customers and unregistered trading names
Lapsed firms with “orphan accounts”
- The FCA has confirmed that, for the nine firms with “orphan” accounts when their permission lapsed at 31 Dec 2014,
- All impacted customers of these nine firms have been written to, either by the DMC or the FCA (where FCA did not receive assurances that contact had been made by the DMC)
- The letter was to include key elements -
- Clear position on regulatory status of the DMC
- DMC no longer able to provide regulated debt management activity
- Statement of debt outstanding
- Availability of free debt advice as per the MAS leaflet
Some examples have come to light where all the trading names under which a DMC firm operates are not recorded on the Interim Permission Consumer Credit Register. The note below is a summary of discussions with the FCA.
FCA position on portfolio transfers and lapses
- DMCs that sell or transfer their portfolio, or where Interim Permission has lapsed were advised to write and advise customers and creditors.
- DMCs that purchase from a third party, or transfer a portfolio within a Group, were also advised to write to customers and creditors of the change
- This message was communicated by the FCA in webinars, workshops and roadshows as part of the AP01 authorisation engagement process
- FCA see this communication as a requirement under Principle 6 and Principle 7.
If lenders have concerns about whether a firm or any trading name have interim permission, the facts need to be ascertained before any communications is sent to customers advising that their DMC is no longer authorised to manage their debt plans.
Lender considerations when portfolios sold or transferred
- Obtain confirmation from the selling DMC as to what has happened (where possible)
- Obtain confirmation from the acquiring DMC
- When transaction was completed
- Confirm that existing LOA remains operative, or whether new LOA are required.
- When they wrote and advised customers
- When they wrote and advised Creditors
- Trading name not registered
- If the trading name is not registered on the Consumer Credit Register, this should be highlighted to the DMC so that they can take immediate action to correct
- Speaking to the FCA they have advised that firms with Interim permissions can do an online submission to amend the trading names on the register. This should only take a few days for the FCA to action, and therefore minimal delay for customer.
- If the DMC no longer wish to use that trading name (and it is not recorded against them on the Credit Register), and a new case is submitted on these documents, my view is that they need to get a new LOA on the correct forms of a registered DMC firm/ trading name. (This aligns to the need to have clear communication with the customer, so that the customer knows who they are dealing with)
- If a DMC sells their portfolio, the purchaser is likely to be assuming all rights under the contract. Unless the new DMC wants to change the LOA, the existing LOA would hold. The new DMC would need to provide evidence to the creditors that they have taken over the firm and therefore have authority to discuss the customers affairs. Any trading names that continue to be used need to be registered. If the trading name isn’t registered, the DMC need to do the online submission as mentioned above to correct the omission.
- The advice from the FCA would imply that there should not be a situation where there is a significant customer impact if a trading name has not been registered, as this can be quickly remedied. If delays and issues are occurring, can you please let me know as we would want to minimise impact on customers as these changes are not a result of any action that the customer has instigated.
- Lenders might decide to use discretion in exceptional circumstances, where they are satisfied that a known DMC has an authority to discuss a customers’ affairs, the DMC firm is on the Creditor Register with an Interim Permission status, however a trading name is in course of being updated.