FCA consults on debt packager referral fees ban
The Financial Conduct Authority (FCA) has opened a consultation into a proposed ban on debt packager referral fees from debt solution providers, as part of its work to protect consumer outcomes.
The consultation will remain open until 2 March, during which time the FCA will update its analysis on the market. If the proposals are implemented, the measures would end the current debt packager business model.
“Many people are facing pressures on their finances due to the rising the cost of living, so it’s crucial they get good quality debt advice,” said Sheldon Mills, executive director of consumers and competition at the FCA.
Read more: FCA asks regulated firms for feedback
“Unsuitable or poor advice can really harm people’s financial lives. We want to stop this harm by removing the conflict of interest between firms giving advice in the customer’s best interest and recommending an option that makes firms more money.”
The regulator initially consulted on a ban in November 2021, after “identifying a lack of adequate management of the conflict of interest between giving advice in the customer’s best interests and recommending an option that makes the firms more money”.
Read more: FCA tells high-cost lenders to actively mitigate harm to consumers
Since then, the regulator has been cracking down on any activities that have the potential to cause consumer harm.
The referral fee ban is aimed at protecting consumers from entering into a debt solution which is not right for them. This could mean an individual voluntary arrangement (IVA) or a protected trust deed, which could result in higher fees over a longer period of time.
Read more: Some firms not ready for Consumer Duty, FCA warns