On 12th January 2024, the Administrative Court refused permission for Promethean Finance Limited to bring a judicial review claim to challenge the Financial Conduct Authority’s (FCA) rules that ban referral fees for debt packagers.
The regulator introduced rules last year which banned debt packagers from receiving referral fees paid by debt solution providers.
This followed the FCA’s discovery of a lack of adequate management of conflict of interest in packagers’ advice.
The ban was implemented in order to remove a strong incentive for debt packagers to offer advice without regard to the best interests of the customer, or that is not appropriate to their individual circumstances.
The FCA reported that it saw evidence of debt packagers appearing to manipulate customers’ details so that they met the criteria for individual voluntary arrangements (IVAs) or protected trust deeds (PTDs), as well as using persuasive language to promote products without explaining the risks involved.
In some cases, the regulator found evidence of customers in financial hardship which was worsened as a result of the recommended solution.
The ban was intended to ensure consumers get better advice and help them to access a suitable debt solution where appropriate.
