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The Credit Services Association (CSA)
Impact on customers using debt management companies
Members are asked to be aware that some disruption to the availability of debt advice is expected in January 2015 and that a number of customers with existing plans operated by a debt management company, may find themselves without a plan provider.
The authorisation slot for debt management companies (DMCs) is 1st October to 31st December 2014 and we anticipate some hiatus in the market at the end of this period with many customers left without a plan provider.
Members may be aware that the FCA has previously expressed concern about its preliminary findings in the DMC market (criticising in particular the nature of the advice given, fees charged and arrangements for handling client money) and we understand that a number will find that compliance with the ImFCA regime is too great a burden on their business and opt to withdraw from the market when their interim permissions expire on 31st December.
Customers in this scenario will be in a particularly vulnerable situation having taken action to deal with their debts and then losing their plan provider. They are likely to be confused as to how to react and distressed as to whether this will make their position worse. The timing of this hiatus in the market is unfortunate given the stretch on household budgets over the Christmas period.
Customers of affected DMCs will be advised directly by the FCA which will refer them to Money Advice Service along with other providers of free debt advice. The customers will face a period of uncertainty while the FCA resolves the exit of relevant firms and reconciles client money that those firms have collected.
Members are asked to monitor the position of customers and act with forbearance when dealing with any affected by these circumstances. The Money Advice Service has created a leaflet for distribution to affected customers directing them to alternative sources of advice and assistance and we will shortly make this leaflet available on the CSA website for download by members and customers. This will form part of a dedicated help section in our members pages which will be active shortly. The creditor trade bodies including CSA, BBA, UK Cards and FLA are working closely together to ensure a consistent message is delivered to customers.
To assist members with this we will be obtaining at the earliest possible opportunity details from the FCA as to which DMCs are affected and members will be notified by e-mail initially. The FCA will not be able to confirm details of the affected DMCs before 2nd January 2015. Members are advised to contact affected customers to offer review and signpost where necessary to sources of alternative support. CSA will be available to assist members with particular difficulties arising from this situation including support in preparing customer correspondence and asks all members to monitor the situation in the New Year and advise it of any impact and particular concerns.
If you have any questions please contact us.