HM Treasury consulted on proposals to legislate for a new Financial Conduct Authority (FCA) gateway for firms acting as principals to appointed representatives (ARs). StepChange welcomed the proposals:
- StepChange agrees that introducing a specific permission regime for principals is necessary given consumer harm linked to AR arrangements. The proposal should strengthen the role of principals and allow the FCA to better identify where risks of poor consumer outcomes are high and intervene.
- StepChange’s concerns about the relationship between principals and ARs are driven by the charity’s experience of the commercial IVA market, where FCA-authorised firms and insolvency practitioner-led IVA firms can each be advising people at different stages of the IVA set up process, and there is evidence of frequent poor ‘take on’ practices where consumers receive poor advice and are directed to inappropriate IVAs. Where inappropriate IVAs fail, consumers are left in a worse position than at the outset, while those involved in marketing and arranging the IVA have made a profit.
- While StepChange broadly agrees with the proposed implementation approach and minimising disruption, we think some disruption of existing principal-AR relationships is necessary to address poor conduct where it exists.
- We support extending FOS jurisdiction to consider complaints directly against ARs when principals are not responsible, ensuring consumers are not left without access to redress. However, we note this highlights some consumers can still be left without access to redress where their complaint relates to a matter under the IP regulatory regime.
- We also call for coordinated action by HM Treasury, the Insolvency Service and the FCA to put in place a more effective IVA regulatory regime. There is a long-standing need for effective policy action to regulate the commercial IVA market. This should put more distance between regulators (recognised professional bodies, RPBs) and IVA firms, address a fee structure that drives consumer harm and set and enforce robust conduct standards including access to consumer redress.