The Financial Conduct Authority has found that debt management companies are failing to provide the service they are being paid for and offering poor advice to indebted businesses. The findings raise issues for firms seeking the recovery of debts as well as those companies who may be struggling to pay back the money they owe.
The city regulator referred to the practices of some companies as unacceptably poor, which is particularly evident in cases where businesses were given up to 125 years to pay off the money they owe under on ‘debt plan’.
As a result of these findings it is likely that several debt management firms will go out of business if they fail to meet strict new guidelines. The number of firms is expected to be reduced from 200 to no more than 20 or 30 during the cull. This should come as welcome news to businesses seeking to recover debts who will understandably want to get as much money back in as shorter timeframe as possible.
There was also room for improvement highlighted by the FCA on those firms who took their fees from creditors rather than the debtors themselves.