Debt Counselling (or Debt Advice) is a regulated financial activity, this means that most firms that provide debt advice must be authorised and regulated by the Financial Conduct Authority (FCA).
There are some exceptions, these are referred to as exemptions or exclusions and include:
- Local Authorities
- Insolvency Practitioners (offering IVA's)
- Lead generators (unregulated and providing client referrals to commercial firms)
The regulation is a good thing for consumers because it means that FCA regulated firms offering debt advice have passed strict compliance checks to become authorised. Firms then have to stick to a professional code and treat their customers fairly.
When you get debt advice, it is important to check that a firm is regulated, you can check on the FCA Register.
The FCA has two levels of authorisation:
- Full permission
- Limited permission
The level of permission depends on the type of regulated activity. In terms of debt advice, the level of permissions is simple:
- Most firms require 'Limited Permission' for debt advice
Other defined FCA category permissions
Firms are also required to be authorised for other defined category permissions, for debt advice these include the following:
- Requirements - not for profit (charities and 'not for profit' organisations)
- Client money (only if supervising debt management plans)
- Debt counselling (general advice)
- Debt adjusting (negotiating lower repayments with creditors)
- Providing credit information services (checking consumer credit files)
It is easy to tell whether an authorised firm is a 'not for profit' because their FCA register entry will show as 'Requirements - not for profit'.
Reasonable contemplation of an IVA
A common FCA exclusion is 'in reasonable contemplation of an IVA'. This exclusion is usually used by unregulated lead generators who look for possible IVA client referrals to send to an Insolvency Practitioner in exchange for a commission payment.
It is always best advice to get initial help from an FCA regulated debt advice organisation to make sure that you have been fully advised of all your appropriate debt advice options. Most not for profit debt advice organisations provide holistic services that look at income maximisation and budgeting, such as Money Advice Hub.
FCA Status Disclosure
Firms authorised and regulated by the FCA must disclose their regulatory status in letters (and electronic equivalents) to customers. Electronic equivalents include emails but not text messages.
The wording should be: 'Authorised and regulated by the Financial Conduct Authority'. You will usually find the Firm's status disclosure and Reference Number (FRN) at the footer of website pages.
You can find out more from the FCA website page on 'Status Disclosure'.
How to check a firm on the FCA register
- Start a search on the FCA Register
- Type the firm's name or FRN in the search bar (brand names should be picked up as a 'trading name' if the firm has registered properly.
- In the results you might see a list of firms, choose the one that matches the firm you are dealing with or the listing that states 'authorised' in the status column.
- If there are 'no results' then the firm you are searching is probably not authorised. If in any doubt, you can contact the FCA direct.
- Once you have selected an 'authorised' firm, you need to scroll down to the bottom of the page and open up the grey tab 'permission'. You can then check all of the permissions.
- Open the grey tab 'Trading/brand names' to check other names that belong to the FCA authorised company.
The Financial Conduct Authority (FCA) - Consumers (and people representing consumers)
T: 0800 111 6768 (freephone) or T: 0300 500 8082 from the UK, or +44 207 066 1000 from abroad. Calls using next generation text relay, please call us on (18001) 0207 066 1000.
Open Monday to Friday, 8am to 6pm and Saturday 9am to 1pm.
Head Office: 12 Endeavour Square, London, E20 1JN. Find out how to find us.