Apply to become a not-for-profit debt advice firm

Your regulatory business plan[2] (RBP) should explain:

• Aims and objectives of your firm and why you’re applying for authorisation.
• Regulated activities your firm will carry out.
• Any unregulated activities of your firm, eg food bank services, budgeting advice, other charitable business.
• Types of debt solutions your firm will provide advice on and whether your firm intends to offer in-house debt solutions, eg debt management plans.
• Third-party debt solution providers your firm will refer consumers onto, if your firm does not provide the solutions itself, and whether your firm will be receiving a referral commission.
• Who is responsible for overseeing the debt advice service and whether they have relevant qualifications and experience.
• The number of debt advisers employed at your firm and whether they have relevant qualifications and experience.
• Whether your firm will be a Section 21 financial promotions approver[3].
• Whether your firm intends to appoint any appointed representatives.

It should also cover how your firm will:

• Ensure all advice given, and actions taken, are in the best interests of the customer.
• Ensure the debt advice and / or debt solutions offered meet the needs of your customers.
• Find customers, eg referrals from local authorities, advertisements in local newspapers, online.
• Be funded and whether you have a minimum of 12 months’ funding in place.

In terms of customer experience, it should cover:

• How many customers your firm expects to provide debt advice services to in the first 12 months.
• Whether fees will be charged to your customers. If so, list these.
• How your debt advice customer journey works in practice. This could include:
  • Initial engagement.
  • Assessing circumstances.
  • Determining suitable debt solution and advice giving.
  • Referring customers to third-party debt solution providers and / or providing debt solutions in-house.
• How you will provide an ongoing review of your customers’ circumstances where you provide debt solutions in house, eg administer debt management plans.
• Where customers will be referred if they aren't suitable for a debt solution offered by your firm.

Your income and expenditure policy should detail how your firm will assess a customer’s financial position and suitability for appropriate debt solutions. 

The policy should set out:

• How you assess a customer’s personal and financial circumstances. Include any templates/adviser scripts used in the process.
• What evidence you request from the customer to verify income/expenditure.
• Whether you will apply industry guidelines on discretionary expenditure.
• How you will approach situations where the customer’s expenditure either exceeds or is below industry guidelines.
• How you will monitor the ongoing suitability if you provide in-house debt solutions, such as debt management plans.
• Whether you look to explore income maximisation with customers.

This should demonstrate that you:

• Identify the nature and scale of vulnerabilities that are likely to be present in your target market and customer base.
• Can respond to customer needs throughout the lifecycle of a product, such as through design, delivery and customer service.
• Ensure staff have the right skills and capabilities to recognise and respond to the needs of customers in vulnerable circumstances.
• Have systems and processes in place to support the delivery of good outcomes to all customers, including those in vulnerable circumstances.
• Monitor and assess whether you're meeting and responding to the needs of customers with characteristics of vulnerability.
• Can take action to put things right if they go wrong.

Read our detailed guidance on the fair treatment of vulnerable customers[4] for more information.

This policy will need to:

• Comply with our rules even if your main business is also subject to industry rules or guidance.
• Explain how you'll identify and deal with complaints in line with our timeframes, and how staff will be trained to recognise, respond to and record customers' complaints.
• Explain how customers will receive a satisfactory resolution and be treated fairly. Including showing that your firm's communications will be clear and transparent, keeping customers informed of progress, next steps and their rights.
• Explain how you'll use complaints to prevent things going wrong in the future and prevent customers from suffering foreseeable harm.

Your plan should demonstrate:

• You understand the risks your business faces and how you plan to control them.
• It's tailored to your business and relevant to the regulated activities you plan to carry out.
• You've identified the relevant FCA rules and guidance that apply to you and have checks in place to ensure you comply with them.
• Who has responsibility for carrying out these checks, how often they'll be done and what record you'll keep confirming that they've taken place.

This should be tailored to your business. The plan should explain how you would wind down your firm and stop regulated activities in an orderly manner – while minimising disruption to your customers – in the event you cannot secure future funding.

Your plan should explain:

• The different types of events that could lead your firm to wind down and stop providing debt advice. For example, if you cannot secure future funding, you lose all or most of your debt advisers, or there is no longer a need for your service.
• How you will monitor the potential for wind down on an ongoing basis.
• Which organisation(s) will take on any of your customers requiring continued debt advice support.
• How you will manage communications with customers about the winding-down of services and closure.
• How the handover of customers will be managed, eg customer records and existing debt arrangements.

Our Consumer Duty[5] sets higher and clearer standards of consumer protection across financial services.

Your application must show you are complying with the Duty. It should explain to us how you will act to consistently deliver good outcomes to retail customers. 

Read our Dear CEO letter to debt advice firms[6] as a useful steer on what we expect.

How the Duty will be practically applied should be reflected in your firm’s policies, processes and Management Information (MI). 

Your application should explain how your firm: 

1. Developed its products and services to ensure they are delivered in the best interest of consumers.
2. Assessed and determined that its products and services offer fair value to consumers.
3. Communicates in a way that supports consumer understanding and equips consumers to make effective, timely and informed decisions.
4. Provides support that meets consumers’ needs throughout the life of the product or service. 

You should provide this information in your RBP or as a separate document. 

Before we can assess your application, regardless of the size and legal status of your firm, you must have:

• At least 12 months’ funding secured.
• Financial forecasts in place.

If your firm is already operating, we’ll also need to see your firm's historical accounts.

Minimum requirements we expect in your financial forecasts

Firms must provide:

• 12-month projected balance sheet
• Income statement.
• Historical financial accounts (where applicable) limited to the last 2 years.
• Evidence of your firm’s 12-month funding arrangements. This should specify the amounts and source of funding.
• Details of your plans to secure funding beyond the initial 12 months.

The case officer assessing your application may ask for additional information.

You should provide CVs for:

• Each debt adviser at the firm
• Any individuals carrying out QA checks or overseeing the debt advice service.

CVs must set out:

• Relevant employment experience.
• Qualifications achieved.
• Relevant training already undertaken.
• Details of any planned training or pending qualifications.

All advice given to customers should be provided in a durable medium, eg in writing.

We require examples of the debt advice communications you will send to customers.

Your debt advice letters should:

• Summarise the customer’s circumstances.
• Contain a financial statement.
• Ensure your recommendation considers all available and suitable debt solutions and explains these in a clear manner.
• Include the benefits, risks and costs of the recommended debt solution, explaining why the solution is suitable for the customer's circumstances and other solutions are not.

Your firm will need to show:

• How its quality assurance (QA) framework for monitoring quality of debt advice identifies/monitors operational risk.
• It can identify shortcomings, take appropriate action to make continuous improvement and address identified weaknesses.
• QA checks are focused on the fair treatment of customers and achieving good customer outcomes.

We therefore expect your QA framework to include:

• Who will conduct the QA reviews – those responsible should have an appropriate level of knowledge, skills, and experience to provide oversight of the debt advice service.
• Whose work will be QA checked.
• How often will QA checks be carried out.
• How will staff be assessed and against what criteria.
• What documentation is used to conduct and record a QA assessment.
• What constitutes a QA pass or fail.
• How QA feedback is provided.
• How QA management information is recorded and utilised.
• What root cause analysis is conducted where non-compliance is identified and actions following this analysis.

Your chart needs to show:

• How your firm is organised, including the names and job titles of all employees working for and overseeing the debt advice service.
• The group and ownership structure (where applicable).