To consolidate or not to consolidate?

Malcolm Davidson

October 11, 2019

Malcolm Davidson (pictured) is director at UK Moneyman

As brokers I’m sure we all take debt consolidation remortgages very seriously.

It’s a course of action where a customer needs to know all the implications of securing debt which is currently unsecured and how much more interest they will pay over the term.

None of us are just “order takers” but we have all done cases where customers have reduced their outgoings by hundreds of pounds per month.

For the right customer it can be a real life-changing transaction.

I recently did one of these for a low earner whose credit card balances had rocketed after a divorce and another family issue and the savings we made were equivalent to half of her net take home pay.

She can now build up an emergency fund and has some disposable income for the first time in years. A good outcome.

But when to consolidate and when not to? It’s a tricky area for sure. Not long after the FCA’s thematic review into Debt Consolidation a few years back I read a FOS ruling where they had apparently found against the broker because everything was consolidated apart from a couple of store cards – FOS said the broker should have recommended that these were consolidated too!

I couldn’t understand this ruling: fair enough if the broker was consolidating zero per cent cards or loans with a short period of time to run, but this? Should we recommend everything be consolidated now?!

I was perplexed but luckily I was due to meet with the FCA in Leeds not long after and I wrote to them ahead of the appointment expressing my concerns.

The FCA were really helpful. (AR’s out there take note, if you want to go DA don’t let your network spook you about how hardline and scary the FCA are, it’s a load of claptrap).

Whilst they were unable to comment on the specific case they said that sometimes the headlines on FOS rulings do not reflect the intricacies of the case in question.

I asked them when ought we to consolidate and when not?

They answered, “Look, you’ve requested a one-to-one with the FCA of your own accord. That says a lot in itself about you.

“You obviously care about your clients and you’ve been doing the job over 20 years. No-one is in a better position than you to make the right recommendation for an individual client”.

Wow, I thought. They are right, of course they are right! It finally sank in. If I can’t be sure if a debt consolidation is right or wrong for a client how can the regulator be expected to?

I am at the coal face day after day, building up years of experience advising clients on the pros and cons so together we can find the best route forward.

I gained so much confidence from that meeting. Just keep on doing what you do, listen to the clients and make a recommendation for them to accept or reject.

Do the right thing time after time, put the clients’ interests before your own and give open and honest advice. Do these things, be true to yourself and your values and you have little to worry about.


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