Brokers warned over unregulated debt counselling
Debt counselling is becoming an increasingly important factor in the mortgage industry and as more intermediaries look into the practice as a potential business opportunity, fears are growing that clients may be damaged by bad advice.
Many brokers and IFAs think that debt management will become a hot topic in 2006 but some fear they will involve themselves in the practice without fully realising what they are getting involved in.
Lenders, including Birmingham Midshires, send clients to see debt counsellors as part of the mortgage application process. But because the area is unregulated, brokers are concerned anyone will be able to set up.
Nicholas Hanson, director of Hanson Financial Management, said intermediaries may not have the right skills to handle debt management.
He said: “The average intermediary will often look to put short-term debt onto a mortgage but for clients who owe over £15,000 to £20,000, this isn’t the best option. There needs to be some sort of training, perhaps through a CeMAP or a CII course, as this will be the growth area for IFAs, and they need to know the practical and common sense methods to help their clients in the best way possible.”
Chris Cummings, director-general of the Association of Mortgage Intermediaries (AMI), insisted brokers who want to branch out into this area must be careful.
He commented: “Within this area it is not just good technical skills that are needed but good people skills too so intermediaries must proceed with caution and keep in mind the Financial Services Authority’s ‘Treating Customers Fairly’ policy.”