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Debt management plans branded unsuitable by the Financial Conduct Authority

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BBC News has recently reported that the Financial Conduct Authority (FCA) has criticised some debt management companies for persuading people to sign up to unsuitable and expensive repayment plans.

It has been suggested that some companies are targeting vulnerable individuals who are struggling to make ends meet and persuading them to enter into unsuitable plans. Such plans are usually at a significant cost to the consumer.

It remains a concern that some people may still be persuaded by unsuitable plans. The FCA plans to make it a requirement that debt management firms provide their clients with guidance as to where they can obtain free debt information prior to the client entering into the plan.

This news comes at a time where the financial security of struggling families has come under scrutiny. The insolvency trade body (R3) has recently reported that their Personal Debt Snapshot series found that around 40% of British adults struggle to live from one payday to the next. Food prices and energy bills are cited as the main reasons for such financial difficulty.

It is crucial that people facing these circumstances do arm themselves with as much information as possible so that they can make an educated and suitable choice for themselves. It is far too easy for borrowers to be swayed by the persuasive marketing tools that some of these companies might employ.

By Nicola Whittle, insolvency solicitor in the commercial team

Stephensons has insolvency specialists who can assist those struggling with debt to make an informed decision about the most appropriate course of action. Contact us for advice.