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