The Central Bank of Ireland has written to the 55 debt management companies authorised to operate in the country, warning them to critically assess their compliance arrangements.

The warning follows an inspection of the debt management sector, which found deficiencies in how some firms assess consumers’ circumstances prior to giving advice, and also in how they are explaining the impact of taking such advice.

The Central Bank said consumers must be provided with a clear explanation of the advice being given based on an analysis of their circumstances and the consequences of acting on such advice. Some firms were not able to demonstrate they had done this.

There was also a failure by some companies to carry out comprehensive analysis of a consumer’s financial circumstances before recommending a debt management solution.

Consumer culture

Central Bank director of consumer protection

Bernard Sheridan

said these firms were targeted for inspection to ensure a positive consumer-focused culture from the outset.

“As most consumers who pay for the services of these firms are already in financial difficulty, the Central Bank requires firms to gather all the consumer’s financial details in order to take a complete view of consumers’ circumstances prior to giving them advice on their debts.”

Irish Brokers Association head of compliance Susan Naughton said the level of regulation applied to this area of consumer support is so robust that few are prepared to offer this service anymore.