DEBT firms have been slammed by the city watchdog for continuing to push people into unaffordable repayment plans.
The Financial Conduct Authority (FCA) had “significant concerns” about the market when it first looked into commercial and not-for-profit firms that provide debt advice and administer debt management plans back in 2015.
Getty – Contributor Debt management firms are continuing to force people into making unaffordable repayments
But while some firms have improved, four years on the FCA says a whopping two thirds still need to buck up their practices.
In particular, the watchdog is concerned about the treatment of vulnerable customers, the advice given to couples, and the use of a one-size-fits-all approach.
It cites one example of a cancer sufferer who was hounded for unaffordable payments despite being out of work because of their illness.
In another case, an 87-year-old widow on a 95-year debt management was pushed into signing online documents despite being confused and uncomfortable using technology.
How to cut the cost of your debtIF you’re in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money
Work out your budget – write down your income and take away your essential bills such as food and transport. If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum – If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner – If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them. Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don’t pay
Get advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further. Organisations such as Citizens Advice and the Money Advice Trust can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans.
The FCA is further investigating these cases and has also begun enforcement action into another firm – although it wouldn’t tell us which providers this involves.
Other organisations have been warned to clean up their acts or they too will face enforcement action, which can ultimately lead to a fine or other sanctions.
Jonathan Davidson, executive director of supervision, retail and authorisation at the FCA, said: “It is vital that consumers who need help with their debts get quality advice and, if they enter into a debt management plan, that they can afford the payments.
“We are pleased to see the progress that debt management firms have made in becoming compliant. Those which have focused their culture on what is best for their customers, and not just on compliance, have made the biggest strides.
“But many firms have more to do, particularly for more vulnerable consumers, and we have also found that a small number still have unacceptable standards and practices – so we are taking action to stop this.”
How to get help for freeTHERE are lots of free organisations that can help you with your problem debts. Here are a few:
Citizens Advice – 0808 800 9060
StepChange – 0800 138 1111
National Debtline – 0808 808 4000
You can also find information about Debt Management Plans (DMP) and Individual Voluntary Arrangements (IVA) on the Money Advice Service website and on the Government’s Gov.uk site.
According to the FCA, only 39 of the 311 commercial firms offering debt management plans that applied for authorisation to continue under the FCA’s regime back in 2014 were granted it.
The Sun has contacted one of the largest debt management trade associations, the Debt Managers Standards Association (DEMSA), and we’ll update this article if we get a response.
HEALTH CHEQUE GPs to stop charging up to £150 for forms giving debt and mental health help DEBT CRISIS Debt-laden families borrowing THIRD more than they earn, figures reveal LOWEST OF THE LOW Debt collectors slammed for preying on desperate customers GO FOR BROKE How to beat debts as the poorest 10% forced to borrow to survive MORTGAGE MADNESS What to do when an interest-only mortgage ends as 81,000 finish this year
It was announced last October that hard-up Brits with mental health issues will be able to get unlimited time to pay back debts.
If you’re struggling, here’s how to get out of debt in eight simple steps – and get advice for free.
While Money Saving Expert Martin Lewis also shares his top tips on clearing all your debts.
Mum-of-three trapped by poverty premium and ‘rip-off’ high cost credit loans feels she’s ‘existing, not living’
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at email@example.com