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FCA Proposes Ban on Debt Packager Fees

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Say Goodbye to Mis-Sold IVAs: FCA Proposes Ban on Debt Packager Fees.

The Financial Conduct Authority (FCA) is taking a strong stand against debt packagers who receive referral fees from debt solution providers. In an effort to improve consumer outcomes and reduce mis-sold IVAs, the FCA has confirmed its intention to ban this current business model.

A consultation was conducted in 2021, and based on the responses received, the FCA conducted further research to examine the impact of its proposals. 

A further short consultation will allow the FCA to update its analysis of the market, by giving stakeholders the opportunity to comment on the proposed ban of referral fees and provide insight on any new developments in the market. If the proposals are implemented, the measures would end the current debt packager business model and may come in after a short implementation period. 

Many people are facing pressures on their finances due to the rising the cost of living, so it’s crucial they get good quality debt advice.

Unsuitable or poor advice can really harm people’s financial lives. We want to stop this harm by removing the conflict of interest between firms giving advice in the customer’s best interest and recommending an option that makes firms more money.

Sheldon Mills, Executive Director of Consumers and Competition at the FCA,

Consumers who enter a debt solution which is not right for them, such as an Individual Voluntary Arrangement or Protected Trust Deed, can face dire consequences. For example, if a consumer is accepted onto an IVA following poor advice from a debt packager when a Debt Relief Order would have been more suitable, this could cost them an extra £4,710 and take five years longer to become debt free.   

If you are interested in having your say on this matter, the consultation is open until March 2, 2023, and can be found on the FCA's website. This is your opportunity to contribute to shaping the future of the debt industry and protect consumers from the harmful practices of mis-sold IVAs. So, don't miss out on the chance to make a powerful impact!