Central Bank review critical of debt management firms

Debt management firms operating in Ireland have been strongly criticised for providing misleading information on fees and charges and failing to ensure their employees have the appropriate qualifications to advise consumers.

The Central Bank, which began regulating such companies in late 2013, has written to all the 48 licensed Irish debt management firms to warn them of the need to provide full transparency on fees and other essential information required under the Consumer Protection Code.

Central Bank staff recently reviewed 35 debt management firms, which account for 73 per cent of all authorised companies, and found that about half are failing to provide sufficient information such as issuing a statement outlining recommended course of action for clients, as demanded by the code.

The study found that just one of the 26 websites reviewed contained proper information on fees and charges, while many failed to provide terms of business or displayed inconsistent and confusing content on areas such as complaints procedures.

The review also found that some websites were displaying out-of-date information and regulatory disclosures that could be deemed to be an endorsement of the firm by the Central Bank. Others did not contain any regulatory disclosures.

The Central Bank’s also uncovered a failure by firms to ensure that employees providing debt management services were able to meet minimum competency standards. In eight of the 10 firms inspected, staff members had not registered for the first available sitting of the examinations required by the Minimum Competency Code.

Director of consumer protection Bernard Sheridan has written to each firm on the issues identified and is taking appropriate supervisory action, including instructing companies to take down websites that cannot be amended immediately.

“Debt management firms, for a fee, provide advice to consumers on how to deal with their debts and may negotiate with creditors on behalf of those consumers. Many of these consumers are struggling to cope with their debts and it is important that any advice or information they receive is of the highest quality,” said director of consumer protection Bernard Sheridan.

“Debt management firms have a responsibility to act in consumers’ best interests and we expect firms to be upfront and fully transparent about their fees and charges, including details on refundable costs - especially as there are significant variations in fees and charges,” he added.

A number of debt management companies have set up in the Republic over the last few years. Such firms offer advice to consumers struggling to cope with debts by negotiating with creditors on their behalf. However, the nature of these companies’ activities and the powers they have over clients has recently been curbed following criticism.

The Central Bank recently introduced additional rules in January to strengthen the protections in place for consumers including in relation to disclosure of fees and charges.