The Financial Conduct Authority (FCA) since replacing the Financial Services Authority (FSA) in 2013 and assuming consumer finance regulation responsibility from the OFT has had a mission to make sure the financial markets in the UK are honest, fair and effective to ensure consumers are treated fairly. Regulating over 50,000 financial services firms and markets to secure an appropriate degree of protection for consumers, the FCA has set out various rules and penalties over the years with standards having to be met by companies in order to be classified as “FCA Authorised”, all for the protection and fair treatment of consumers in the UK.
Recently there has been an increasing number of unauthorised firms using the details or similar details of others who are FCA Authorised to convince consumers that they are genuine. In 2017 to date the FCA has already identified over 70 unauthorised organisations. The FCA has put warnings on their website for consumers and creditors alike to be aware and for relevant controls to be put in place.
Many of these unauthorised firms target consumers within the UK, claiming to be Authorised by using the FCA details of another, real Authorised firm. This is what the FCA call ‘clone firms’ and this is a tactic used by fraudsters to contact consumers (usually at random) and most often via cold calling. Consumers need to be aware of this and be wary of such cold callers as they may use an Authorised name with the Unique Firm Reference number (FRN) which would allow a consumer to look on the FCA register and receive a false sense of security that the caller is from a legitimate organisation.
There are alternatives to this where fraudsters claim to represent an Authorised firm, again providing false details and advising that they are acting upon their behalf and proceeding to provide their own contact details to an unsuspecting consumer. These details may have subtle differences to the details on the FCA register, e.g. a digit different in a phone number or cloned website details with a different suffix, or they may target an organisation where not all details are evident within the register (phone, address, website, email etc.)
Although there are no preventative measures for the setup of these fraudulent and unlawful organisations, the FCA are cracking down on identifying, warning and taking enforcement action as swiftly as possible. That doesn’t mean consumers and creditors alike don’t have a role they can play.
What can consumers do?
Consumers need to be wary of such ‘clone firms’ and ensure the right level of due diligence is carried out when conversing with any firms; a Google search on the company and details to check they are who they say they are, checking the Financial Services Register and/or the Interim Permission Register will provide comfort and confidence that the firm is registered and with matching details. This however would also be true of a cloned firm, so some tactful questioning around the reasons for contacting or how they obtained details etc. may help in establishing who they really are; or even a really useful tactic for a consumer is to look up their details and phone them back. Find out if the organisation a member of DEMSA (Debt Managers Standards Association) who are a verified member of the Trading Standards Institute and promote good practice in the debt management industry with a strict code of conduct which organisations must abide by (one rule is ensuring FCA Authorisation). Contact the police independently or an advice agency to help if you suspect a clone firm (not us!).
What should Creditors do?
Creditors have a duty to their consumers under the Consumer Credit Sourcebook (CONC) published by the FCA, to ensure any third parties being dealt with comply with consumer protection legislation and with FCA rules, ensuring that they are truly acting in the best interests of the customer. It is easy for a creditor to identify registered companies as the FCA offer an extract of the register for a small annual fee (less than £5k per annum for a weekly feed of firm data), which seems like a small price to pay to ensure consumers are receiving a best in class service from their creditors. This data could be used in many different ways in order for a creditor to be pro-active, such as:
- An automated process identifying customers being dealt with an unauthorised third-party like a Debt Management Company (DMC), this process could bridge on to bespoke dialler campaigns, SMS, app alerts, emails or letters (any kind of communicative contact you can have with your customers)
- A feed into the Collections system allowing an agent to have an honest conversation that a company is not authorised and therefore may not be providing the best advice for the customer’s situation when being notified of a third-party company managing their debts
Having an awareness of a company’s status allows honest conversations to occur between creditor and consumer in order for both to receive the best possible outcomes. A lot of creditors still manage consumers who are engaging with a third-party company by bespoke back office teams and many consumer notifications are received via correspondence such as email or letter. The FCA register and interim register is available online where back office staff can be empowered to ensure the consumers that they are dealing with are getting the best service possible for the management of their debts.
The FCA are strict with third-party companies such as DMCs when it comes to a consumer debts and how they are to be managed, enforcing appropriate reviews to be held with consumers around their situation and the adherence to FCA requirements for the administering of debt management plans (DMPs). The failure to uphold these rules may warrant the permission removal of a company which tends to drive up standards and is why it is important that consumers and creditors both stay up to date with policy, process and the status of third-party companies.
Regulation can be a difficult item to measure with “grey area” statements such a “reasonable” without a direct target in place. This can sometimes deter doing the right thing when there is no specific goal to achieve. Over the combined experience within Arum there are skilled professionals who have worked with creditors, consumers, debt management companies and the like, to ensure that all parties are accomplished, from treating customers fairly to adhering to regulation and the collection of debt in the middle. Arum have experts who can help in this area and provide steps and assistance towards achieving the goal of appeasing the regulator by taking the “grey areas” and applying sensible, achievable targets behind them.
Owen Atkinson, Senior Consultant