My Lords, I thank the noble Lord for raising such an interesting and critical point on this aspect of consumer credit, and I acknowledge the excellent work of StepChange. The Government have fundamentally reformed regulation of the consumer credit market. Consumer credit regulation transferred from the Office of Fair Trading to the Financial Conduct Authority—FCA—on 1 April 2014. The Government have ensured that the Financial Conduct Authority has robust powers to protect consumers. It has a broad enforcement tool-kit to punish breaches of its rules, there is no limit on the fines it can levy and, crucially, it can force firms to provide redress to consumers. The FCA also has flexible rule-making powers to take further action if it is deemed necessary to protect consumers.
Turning to Amendment 105K on the issue of credit brokers, it is clear that there is a real risk in this market of consumer detriment being caused by unscrupulous brokers. FCA rules already require credit brokers to
disclose their status and any fees payable before the consumer enters into a brokerage contract. The FCA has made clear that disclosure must also cover the consumer’s right to a refund if no credit agreement is entered into within six months following an introduction. The FCA requires credit brokers to comply with the high-level principle of “treating customers fairly”. However, the Government share the noble Lord’s concern about the continued bad practice in this sector. The Government and the FCA are currently jointly considering what further action is needed to protect consumers, and will provide an update in the coming weeks.
Turning to Amendment 105M on the issue of debt management companies, the Government are concerned about the potential for detriment to occur to vulnerable consumers using debt management plans. Our focus is on comprehensively reforming regulation of this sector, as part of our wider reform of consumer credit regulation. Consumers participating in debt management plans are far better protected under the new FCA regime. The FCA has introduced a range of binding rules designed to protect consumers; it has made it clear that fees should not undermine the customer’s ability to make significant payments to the creditors throughout the duration of the debt management plan.
The FCA is thoroughly assessing every debt management firm’s fitness to trade as part of the authorisation process—a process that is already under way. Firms that do not put their customers’ interests first and comply with the FCA’s threshold conditions will not be authorised. The FCA is also undertaking an in-depth thematic review of the debt management sector. The Government therefore firmly believe that the new FCA regime will deliver—and is already delivering—a cleaned-up debt management market that is able to meet consumers’ needs in supporting them to deal with their debts.
The noble Lord suggested that the FCA review lead generators for debt-management providers. The FCA is undertaking this in-depth review of the sector, including looking at how use of these lead generators may be affecting consumers, so that is all part of the mix. I would be very grateful if the noble Lord would consider withdrawing the amendment.