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PERG 17.3 What the advice must be about

PERG 17.3

Q3.1 What does liquidation of a debt mean?

It has a wide meaning. For example, it would cover the following:

  • • paying off the debt in full and in time;
  • • agreeing a rescheduling or a temporary halt to paying off the debt;
  • • the debtor being released from the debt;
  • • agreeing a reduced repayment amount (including the creditor agreeing to accept token repayments);
  • • a third party taking over the debtor’s obligation to discharge the debt;
  • • discharging the debt or making it irrecoverable through personal insolvency procedures such as bankruptcy, a voluntary arrangement or a debt relief order.

Q3.2 What does due mean?

As described in the answer to Q2.1 (What is the basic definition of debt counselling?), debt counselling relates to debts that are due under a credit agreement or a consumer hire agreement. As the regulation of debt counselling is a consumer protection measure the "due" should in the FCA's view be interpreted fairly broadly and should not be limited to debts that are immediately payable (for example, where the debtor is in default). Therefore, for instance, it would cover present obligations to make payments in the future.

Debt counselling is not limited to debts that are overdue. It also covers debts that are not overdue.

Q3.3 Does it matter if the advice also covers debts that are not due under a credit agreement or a consumer hire agreement?

No. If advice is given to a debtor about his debts, some of which are not payable under a credit agreement or a consumer hire agreement, that advice is regulated as long as some of the debts are due under a credit agreement or a consumer hire agreement. There is nothing in the definition of debt counselling or in the policy for regulating it that restricts debt counselling to a situation in which all the debts are consumer credit ones. Where advice covers both the consumer credit debt and the other debt, the advice on both types of debt is likely to be debt counselling as what is done about non-consumer credit debt is likely to affect consumer credit debt, particularly if the advice does not distinguish between the two types of debt. This is similar to the position for the advisory regulated activities in relation to transactions in regulated investments, which cover not only advice on the transaction in the regulated investment itself but also any advice with a view to, or in connection with, that transaction and advice as to any associated or ancillary matter.

For the same reason other kinds of advice that would not otherwise be treated as debt counselling will be included if that other kind of advice is given with a view to or in connection with the liquidation of consumer credit debts. See example (11) in the table in the answer to Q7.1 for an example of this.