Limitations on debt permissions

If you are a full permission firm with the permission of debt adjusting and/or debt counselling with a ‘no debt management’ limitation, you will need to review the limitations held to ensure they are appropriate for your business.

The ‘no debt management’ limitation is not appropriate for certain debt activities, so it is important to check and if necessary vary your permissions.

In order to help you determine whether or not the limitation is correct you will need to review our glossary definition of a ’debt management activity’.  The definition is:

the activities of debt counselling or debt adjusting, alone or together, carried on with a view to an individual entering into a particular debt solution or in relation to any such debt solution, and activities connected with those activities.

A debt solution is defined as ‘an arrangement, scheme or procedure, whether statutory or not, the aim of which is to discharge or liquidate a customer's debts.

Based on these definitions, some firms with the ‘no debt management’ limitation may be carrying out debt management activities (as it is a broad definition) so the limitation they hold is not appropriate for their business.

For example, if you undertake activities such as settling and re-financing a customer’s existing debts then you are likely to be providing a ‘debt solution’. An example of this might be re-finance involving the part-exchange of a car or consolidating a customer’s multiple existing loan repayments into one single repayment.  

Full definitions of debt adjusting and debt counselling can be found in Chapter 2.7 of our Perimeter Guidance Manual (PERG), specifically sections 2.7.8B and 2.7.8C.  Chapter 17 of PERG provides guidance on what amounts to debt advice, in particular PERG 17.5.

Rather than the ‘no debt management’ limitation, there are six new standard limitations which may be relevant to your firm.

Six new debt limitations

For firms involved in asset finance (eg broking of equipment) 

Limited to the sale of goods

  1. Debt Adjusting
    This permission is limited to debt adjusting which is provided in connection with the whole or partial settlement of credit agreements in relation to the sale of goods. 
  2. Debt Counselling
    This permission is limited to debt counselling which is provided in connection with the whole or partial settlement of credit agreements in relation to the sale of goods.
For firms involved in vehicle finance

Limited to the settlement of vehicle finance

  1. Debt Adjusting
    This permission is limited to debt adjusting which is provided in connection with the whole or partial settlement of credit agreements for vehicle finance.
  2. Debt Counselling
    This permission is limited to debt counselling which is provided in connection with the whole or partial settlement of credit agreements for vehicle finance.
For firms not involved in asset or vehicle finance

Limited to no debt management plans

  1. Debt adjusting
    Limited to debt adjusting excluding the conclusion or administration of debt management plans. In this limitation “debt management plans” is defined as: ‘a non-statutory agreement between a customer and one or more of the customer's lenders the aim of which is to discharge or liquidate the customer's debts, by making regular payments to a third party which administers the plan and distributes the money to the lenders’.
  2. Debt counselling
    Limited to debt counselling excluding giving advice about debt management plans. In this limitation ‘debt management plans’ is defined as: ‘a non-statutory agreement between a customer and one or more of the customer's lenders the aim of which is to discharge or liquidate the customer's debts, by making regular payments to a third party which administers the plan and distributes the money to the lenders’.

Actions you should take  

  • Check your firm’s permissions on the Financial Services Register.
  • Check whether the limitations remain appropriate for your business.
  • If your limitations need to be changed, you will be able to remove the current limitation held and select an alternative limitation by completing a Variation of Permission (VOP) application on the Connect system.

You do not need to apply for a VOP if the current limitation held is correct for the debt activities carried out by your firm.

The changes needed within your business if you change your limitation

If you determine that you are a ‘debt management firm’ and request to change the limitation held, certain requirements will be placed on your firm. 

There must be someone in your business that holds the compliance oversight function (CF10). This person could be a current approved person at your firm able to take on the extra CF10 function or an appropriate individual who does not hold a controlled function currently. If you are amending the ‘no debt management’ limitation, please ensure you submit a CF10 Approved Person application with your VOP application.

Section 10A.7.8 of our Supervision Manual (SUP) provides further information and you will see that section 6.1.4C of our Senior Management Arrangements, System and Controls Manual (SYSC) states that a debt management firm must appoint a compliance officer. 

Chapter 10 of our Consumer Credit Sourcebook (CONC) also outlines the minimum capital requirements that debt management firms must hold.

It is ultimately the firms’ responsibility to ensure they are correctly authorised for the type of business being carried out. However, if you have further questions please visit the Connect pages or contact us