Debt management

Customers with money held by debt management firms may now be covered by FSCS from 1 April 2018. FSCS may be able to compensate customers in relation to client money they held with a failed debt management firm. 

Debt management firms often hold client money because a debtor has agreed to make regular payments to the firm, and the firm has agreed to share the money out between the customer’s creditors.

Depending on individual circumstances, FSCS may be able to provide compensation of up to £50,000 in relation to this new type of claim.  The FCA has said that the limit may be reviewed at a later stage in light of actual claims.

A debt management claim would need to meet all of the following criteria:

  • the firm must have failed on or after 1 April 2018;
  • the firm must be an FCA-authorised firm that holds client money;
  • the money must have been received or held by the firm through a UK branch in connection with the regulated activities of debt counselling or debt adjusting;
  • the client money reconciliation process must show that there is a shortfall in the amount of client money the firm held for you; and
  • the firm (or its principals) must no longer be able to meet claims for compensation
  • the customer must be eligible under FSCS’s rules.

Whilst money held by a firm under a Debt Management Plan may therefore be covered, FSCS protection does not extend to:

  • Money paid by a debtor under an Individual Voluntary Arrangement (“IVAs”) arranged by insolvency practitioners (which are not regulated by the FCA); or
  • Debt advice.

Further information:

FCA policy statement

Debt Management Plans

Jargon Buster

Authorised firm

a company, unincorporated body, partnership or individual permitted to carry out a regulated activity by the FCA or the PRA. This term includes a mutual (unincorporated) organisation, for example a friendly society.


qualifying for compensation under Scheme rules.


The Financial Conduct Authority is the UK's regulator for the financial services industry. 


having insufficient assets to meet due debts or liabilities.

Regulated activities

financial services activities subject to rules and procedures laid down by the FCA and the PRA.