What on earth is a “debt packager firm”? These are regulated businesses (by the FCA) who advise consumers how to deal with their debt and often refer them to a debt management company or an Insolvency Practitioner. They would receive a fee for the referral.
Following a recent FCA review of the practices of debt packager firms, five firms have stopped providing regulated debt advice until further notice and the FCA has used formal powers to stop another firm from providing regulated advice.
These referral fees can be many times higher when the firms refer consumers to an Insolvency Practitioner to potentially enter into an Individual Voluntary Arrangement (IVA), than for other debt solutions. The FCA has made very clear to firms that it expects them to manage this conflict of interest to ensure that their advice is right for consumers, not just firms’ financial interests.
The FCA has identified concerns that some debt packager firms appear to have manipulated consumers’ income and expenditure to meet the criteria for an IVA; used persuasive language to promote these products to consumers without fully explaining the risks involved; and provided advice that did not accurately reflect their conversations with consumers or information that consumers had given. In some cases, the FCA’s view is that firms failed to sufficiently consider consumers’ circumstances and vulnerabilities, including mental health issues and economic abuse.
Consumers who are wrongly advised to sign up to an IVA may suffer significant harm. They may struggle to keep up the repayments and if they cannot do so, their IVA may fail.
At Griffin & King we pride ourselves on giving the right advice. If a debtor’s circumstances aren’t right for an IVA, we’ll tell the debtor. Why use an expensive, middleman and risk getting the wrong advice? The truth is that these firms use powerful and slick marketing and debtors don’t understand the arrangements that they are getting involved with.
We wouldn’t touch a debt packaging firm with a bargepole.
If you are aware of any consumers or a sole trader struggling with debt who is considering an IVA, get them to talk to us. We won’t talk about fees until we’re sure there is a viable plan, and we won’t pay any referral fees.
Call me (or any of the G&K team) at any time for a no obligation chat or meeting on M: – 07786 965 009.