If you're applying for authorisation as a debt management or debt packaging firm, there are additional considerations if your activities include giving consumers debt advice.
You must provide suitable, affordable and sustainable debt management solutions for consumers. We'll look at how you ensure that the advice you give is in the best interests of your clients.
Find out more about pre-contract information and advice requirements.
It's vital that you do a full assessment of your client's financial position (income, capital and expenditure) to ensure that your debt management solutions are affordable and sustainable.
If you're a debt management firm, you must also conduct regular reviews of your customers’ financial position and circumstances.
Use of third parties, such as lead generators
Your firm has a responsibility to your clients when you use third parties such as lead generators.
Using third parties at any point in sales or advice could create or increase risks to your clients, so we want to see that you have:
- undertaken due diligence proportionate to the potential risks posed to your clients
- adequate resources and procedures to monitor the activities of any third party acting on your behalf
Our Handbook has more detail on the rules around lead generators.
Back book acquisition
If you have bought another firm’s back book, or are thinking about doing so, we will look at how you have considered your ability to meet your obligations to your new clients.
Acquiring a back book can create significant intangible assets. You will need to be aware of the impact this will have on the calculation of your prudential resources.
Your firm must be able to demonstrate that any product or service sold to a client entering in or completing a debt solution is appropriate and of value to that client.
You should consider how you can demonstrate this if a product or service has the potential to either:
- increase the duration of the debt solution, and/or
- divert clients’ money away from reducing priority debts more quickly
Financial incentives for your staff
We will look at your firm’s remuneration and incentive schemes.
You should ensure that you can manage the risks of advisers providing inappropriate advice because of financial incentives you offer them.