APDSI was created at the end of 2010 to help intermediaries and brokers offer a range of debt solutions to financially disadvantaged clients whilst complying with regulations on consumer credit and debt advice.
Alasdair Warwood, Secretary General of APDSI, believes that the revised OFT guidance makes clear the responsibility of debt management companies to carry out due diligence on the introducers and brokers they use and, by the same token, for brokers and introducers to carry out due diligence on the debt management companies they use.
“We believe the proposals can only be good for consumers and good for the industry,” said Alasdair Warwood. “APDSI, as the representative body for those wishing to introduce their clients to professional and responsible debt solution providers, is keen to see the development of a market which meets the OFT’s objectives. Namely introducers and brokers should be fully transparent about the service on offer and fees charged; explain to consumers both the risks and benefits of each proposed solution; not use misleading names or advertising, including misleading web-based adverts, and they should ensure that the advice provided is in customers' best interests.
“We do however have one or two concerns about areas where we believe the guidance could be stronger and we shall be raising these with the OFT over the course of the consultation.”
The new guidance clarifies the rules regarding licensing, which APDSI welcomes. APDSI insists members must be licensed and registered with the ICO as condition of membership.
The revised guidance also reinforces the fact that the OFT will take a robust approach to enforcement. However, APDSI is concerned that there is continuing scope for hybrids which may lead to a conflict of interest when an introducer or broker is offering both debt management and claims management or when offering debt management and full and final settlements.
APDSI is also worried that the revised guidance still allows for holding back client monies to provide full and final settlements, which can only worsen a client’s credit record. There is no requirement for independent audit to ensure that client monies are held in a ring-fenced account not accessible to the debt management company although this is already a condition of Debt Management Services Association membership.
Warwood added: “Given the spate of collapses over the last year we believe this is a vital consumer protection measure. These latest OFT actions clearly signal the increase in regulation for the protection of consumers facing severe financial difficulties which has to be a good thing. There is a clear desire from the reputable companies in the market to be able to offer consumers the best possible advice and support and APDSI will help intermediaries achieve this, whilst continuing to be able to operate profitably.”
