StepChange Debt Charity wholeheartedly supports and welcomes the Financial Conduct Authority’s proposals today to ban debt packaging firms from accepting referral fees. This will help to undermine the pernicious practices that can lead to consumers seeking debt advice at a vulnerable time being preyed upon by unscrupulous firms, and too often routed towards an IVA from a provider paying high referral fees.
The same approach now needs to be taken to lead generators who are not FCA-regulated, which is outside the FCA’s control and would require the Insolvency Service, the Insolvency Practitioners Association and the other Recognised Professional Bodies to ensure insolvency market practices all support this same outcome.
StepChange Debt Charity also believes that, to solve the debt scammers problem completely, the Online Safety Bill needs to bring scam advertising within its scope. The voluntary arrangements so far adopted by search engines and social media platforms have proved woefully ineffective at preventing organisations impersonating legitimate debt advice charities continuing to appear at the top of search result page adverts, leading consumers down a route that can prove harmful and expensive to them.
Peter Tutton, Head of policy, research and public affairs at StepChange Debt Charity, says: “We have been campaigning for more than two years now for action to stop the bad practices we have been seeing. We have spoken to clients and to people who thought they were StepChange clients who realised they had been duped into handing over money to unscrupulous firms trying to sell them the wrong debt solutions for their needs. So we wholeheartedly welcome the FCA’s robust proposals to ban referral fees for debt packager firms, and urge the Insolvency Service to move forward with the regulation of volume IVA providers to end the harm caused by unregulated lead generators in the debt advice market.
“If we could also see scam advertising brought within the scope of the Online Safety Bill, as well as reform of the insolvency market to ensure that it is fit for purpose, together that would all help to minimise the failure rate of IVAs, where the overall market failure rate is unacceptably high.”