HLP Compliance Blog

Debt Consolidation, Part II

This week we are setting out further details in relation Debt Consolidation in the second part of our three-part series. Last week, we talked about debts counselling and debt management and issued important guidance on how to avoid debt management advice, which is outside the scope of our permissions and therefore would be illegal activity. Click here if you missed it.

This week we are exploring one of the fundamental risks associated with debt consolidation. That risk is that the total amount payable on the individual loans when combined within the mortgage, compared with that which the customer would have paid had the loans/credit not been consolidated will in most cases be a greater amount. It is therefore important that the customer understands this. By showing a calculation of this difference will ensure the customer truly understands the risk and, by attaching the calculation to the customer record, will demonstrate that it has been fully explained.

This risk area is something the FCA were, in particular, keen to focus on as part of their review earlier this year. Please take the time to read the guide and download our useful calculator.

We strongly recommend that you review how you deal with debt consolidation in your regulated and unregulated loans and develop your strategy in accordance with these revised guides to help you stay safe in business.

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