Debt Management Organisations

Lord Sharkey Excerpts

Monday 28th July 2014 Lords Chamber

Asked by

[Lord Sharkey]

To ask Her Majesty’s Government what steps they are taking to ensure that debt management organisations serve the interests of their clients.

[Lord Newby (LD)]

My Lords, the Government have given the Financial Conduct Authority responsibility for protecting customers of debt management firms. Debt management firms are subject to binding FCA conduct rules and must treat customers fairly. FCA prudential and client money requirements are also being introduced to protect customers’ money. The FCA will thoroughly assess every debt management firm’s fitness to trade as part of the authorisation process from October this year.

[Lord Sharkey (LD)]

My Lords, half of the clients of fee-charging debt management companies do not know that there are equivalent free services. These clients are mostly recruited by cold calling and 31 million cold calls were made last year. The FCA says that it does not regulate these calls. Can the Minister say who does regulate them and are cold callers required to advise of the existence of free debt management services?

[Lord Newby]

On the second part of the noble Lord’s question, debt management companies will be required under the new rules to signpost consumers to free debt advice, which will be a major improvement. There are two elements of regulation of cold calling and unsolicited text messages. The ASA has some responsibility in that area and it has already taken action to ban payday lenders’ use of unsolicited text messages. As with its regulation of other financial services markets, the FCA is committed to ensuring that cold calling by phone, text or e-mail makes the identity of the firm and the purpose of the communication clear to those being called.