Regulator’s new rules for debt advice firms

People struggling with debt will save money in unnecessary fees and receive better quality advice due to a new referral fees ban, according to the City regulator.

The Financial Conduct Authority (FCA) has banned certain providers of debt advice from receiving referral fees from debt solution providers.

This, it says, will put a stop to a business model which incentivises debt packagers to recommend certain options that make them more money, rather than what is in the customer's best interest.

Debt packager firms earn money from fees paid when people are referred to solution providers such as insolvency practitioners.

Sheldon Mills, executive director of consumers and competition at the FCA, said: "Good quality debt advice is vital in helping people out of financial difficulty and poor advice can have a devastating impact on those who are already struggling.

"This ban will put a stop to the business model that in cent iv is es bad advice and reduce harm to consumers.

"Anyone struggling with debt can get free and impartial advice from MoneyHelper or other services."

The FCA says it wants debt advice firms to provide a highquality debt advice service to consumers, helping them to manage their debts and to access a suitable debt solution.

Matthew Upton, acting executive director of advocacy and policy at Citizens Advice, said: "Banning referral fees is a big step towards tackling the way some firms prey on and profit from people struggling with debt. Inaccurate or misleading advice from providers can push people further into hardship and further away from a lasting solution to their problems."