The Last Word Comment
Fee or free: is it really that simple?
With the arrival of Financial Conduct Authority regulation, is it time to move on from the old debate?
Nick Pearson Group external relations manager, One Advice Group
nick.pearson@
oneadvice.co.uk
Having spent some 35 years in the debt- advice sector, with all bar five years in the free-to-client or not-for-profit arena, in October 2017 I started work for one of the UK’s largest fee-charging debt- management providers. For those unfamiliar with my personal
views on ‘fee vs free’, this may come as something of a surprise – surely everyone in the free debt-advice sector is opposed to fee- charging debt advice? In my case, nothing could be further from the truth. The reason for this goes back some 18
years. Whilst working at AdviceUK, the UK’s largest network of free independent advice services, in 1999 I commissioned the research report Fee or free? The role of fee-charging debt advice companies in money advice provision. The overwhelmingly positive customer experience of using fee-charging debt advice firms convinced me that there was clearly a need for a mixed economy of free and commercial provision. Indeed, I have argued publically that,
given the demand for free debt advice exceeds supply, and that the gap is only likely to increase, those that can afford to pay for advice could be obliged to do so.
Transparency and choice Transparency and customer choice should drive competition and innovation, and the free and commercial sectors should be able to sit side by side. The best analogy is the NHS and private medical care, which are able to coexist harmoniously. The process of Financial Conduct
Authority (FCA) authorisation of the debt- advice sector is now all but complete. It
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seems that there are only some 20 or so fee charging debt-management firms left standing who are authorised to handle client monies. I am convinced that now is the time for
creditors to give their customers, experiencing debt problems, a choice. That choice is not just about whether they want face to face, telephone, or, indeed, online debt advice, but also if they would be interested in speaking to a commercial debt advice provider or a charitable provider.
Indeed, I have argued publically that, given the demand for free debt advice exceeds supply, and that the gap is only likely to increase, those that can afford to pay for advice could be obliged to do so
Widespread misunderstanding There is a widespread misunderstanding that creditors are prohibited by the FCA Consumer Credit Sourcebook (CONC) from referring to fee-charging providers. The reality is that, under CONC 7.3.7A, if a customer is in default or arrears, a firm should, where appropriate, inform the client about not-for-profit debt advice or the Money Advice Service, and refer the customer to them. However, in addition, under section 3,
the firm “may provide the customer with the name and contact details of another authorised person who has permission for debt counselling, provided that to do so is consistent with the firm’s obligations under the regulatory system”. It appears to be generally accepted that
UK consumers are heading towards a personal debt crisis, and that the demand for debt advice will only increase over the coming years. Because of this, it seems to me that it is
more important than ever that creditors give clients a choice between fee and free debt advice. CCR
December 2017
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