Here we list some typical misconceptions about the way we authorise firms engaged in debt management activity. Then we give you the facts.
✘ A firm must hold permission to carry on both debt counselling and debt adjusting to offer debt advice.
✔ The permissions you need depend on the activities you carry out. If you don’t negotiate with your customers’ creditors, it’s unlikely you’ll need permission to carry on debt adjusting.
✘ A motor vehicle dealer always needs the debt adjusting permission.
✔ The regulated activities that a motor vehicle dealer will need permission to carry on will ultimately depend on what you actually do. If you provide a part exchange service whereby part of a customer’s existing debt is repaid through the exchange of a vehicle and the rest is repaid via a new loan it is highly likely you will need permission to carry on debt adjusting and debt counselling. In this situation it is likely that you will also need to apply to have a limitation related to the settlement of vehicle finance attached to the regulated activities of debt adjusting and debt counselling included in your permission. The same is true if you negotiate with finance companies on behalf of your customers, although the limitation may be slightly different depending on your business.
✘ ‘Debt management’ refers only to firms that offer debt management plans (DMPs).
✔ Debt management is a broad description to describe debt counselling and/or debt adjusting activities carried on in relation to any scheme, arrangement or process for liquidating debts. Therefore depending on the situation, a firm engaging in debt adjusting and/or debt counselling will often be undertaking debt management activity.
A firm may therefore be carrying on debt management activity even if it does not offer DMPs. A firm that carries on debt management activity is classed as a debt management firm and is subject to our prudential and client money rules for debt management firms.
In practice this means you will very likely have to meet our prudential resources requirement and have a CF10 in place. At present the minimum prudential resource requirement is £5,000 though it may be more depending on the circumstances of the particular firm.