The ban on debt packager referral fees

A debt packager is a business that collects your details and passes them to a firm that will handle your debt, and it used to be paid for that introduction. The Financial Conduct Authority introduced a ban on debt packagers receiving remuneration for referrals to IVA firms¹. That single rule is the reason a "free debt help" website can be a commercial operation, and the reason the question of who pays for the advice matters more than the word "free" on the page.

The ban sits alongside a second rule. The IVA Protocol 2025 requires firms to ensure any third-party referrers or introducers are FCA authorised for debt counselling and, if they are not, to direct the consumer to someone who is². So a referral can still happen, but the person making it has to meet an authorisation test, and it cannot be paid for in the way it once was.

If you are looking for debt help, the practical question is not whether a site is a packager but who is paying it and what it is being paid to do. Free advice services exist and do not charge you³. Some private companies say they give free debt advice, but they often charge money for their debt solutions³.

What debt packagers are and what they do

A debt packager sits between you and the firm that will actually run your debt solution. You give it your details, it works out roughly what you owe and to whom, and it passes you on. The firm on the other side might set up a debt management plan, propose an individual voluntary arrangement, or do something else.

Debt management plans themselves are managed by companies known as debt management plan operators or providers, who negotiate with your creditors and manage payments⁶. That is a different role from the packager's: the operator runs the plan, the packager finds the customer.

The wider machinery around debt is regulated. Debt collection is a regulated activity that takes place when a creditor has engaged an external company to recover payments that are past due⁷. A debt may be sold by the creditor to a debt purchase company, which will get in touch with the customer to try and set up a repayment plan⁸. Insolvency practitioners have duties to ensure creditors are treated fairly, repay as much as possible to creditors, help rescue businesses and jobs, help individuals find relief from problem debt, and help investigate fraud⁹.

Where a debt adviser is involved, the options put to creditors can include asking them to stop interest and charges, stop collection agencies recovering debt, accept token payments, or write off the debts¹⁰. A packager does not do that negotiating. It moves you to someone who does.

How debt packagers made their money: referral fees

The business model was an introduction fee. A packager gathered enquiries and was paid by the firm that took the customer on. The fee came from the firm, not from you directly, which is why the service could be advertised as free at the point of use.

That structure is not unique to debt. Credit broking complaints the Financial Ombudsman Service sees commonly involve being charged a fee for finding a loan, sometimes without getting a loan, fees not refunded when no loan was taken out or offered, and being misled or not correctly informed about the loan's terms or cost¹¹. The same shape of complaint, a fee attached to an introduction, is what the debt packager ban addresses.

The reason a referral fee matters is that it can tilt the advice. If one outcome pays the referrer and another does not, the route that pays is the one with a commercial pull behind it. The FCA's own research found people held off seeking debt advice because they were embarrassed about seeking help, worried about their credit rating, lacked awareness of how serious their position was, and needed more explanation about debt advice¹². Someone in that frame of mind is more likely to accept the first route offered.

The FCA ban on referral fees from IVA firms

The rule is specific: the FCA introduced a ban on debt packagers receiving remuneration for referrals to IVA firms¹. It targets the payment, not the existence of packagers, and it targets referrals into individual voluntary arrangements rather than every debt solution.

The IVA Protocol 2025 adds the authorisation condition. Firms must ensure any third-party referrers or introducers are FCA authorised for debt counselling and, if they are not, direct the consumer to someone who is². Read together, the two rules mean a referral into an IVA has to come from someone authorised to give debt counselling, and cannot be rewarded with a referral fee.

This is one of a series of interventions in consumer credit. The FCA banned interest charges on credit that customers had already paid off during interest-free loan periods¹. In rent to own, the recommendation has been to include default fees in the total credit cap, as is in the high cost short term credit (payday loan) cap, to remove incentives¹³. The packager ban belongs to the same family: removing a payment that rewards one outcome over another.

What the ban means if you are looking for debt help

The ban changes who can be paid for sending you to an IVA firm. It does not change what an IVA is, and it does not make every route free.

An IVA applies to all your creditors once creditors who hold more than 75 per cent of your debts accept it¹⁴. While you have one, creditors should stop charging interest on your debts and stop chasing you to pay them⁶, and creditors stop contacting you once they have accepted payment through the insolvency practitioner¹⁵. You can propose an interlocking IVA with a partner by considering both your circumstances and debts and making a joint proposal to all creditors¹⁶. There are fee exceptions: if you have a significant windfall during the IVA and are able to pay back your debts in full, or if your IVA fails, your creditors may require you to contribute an amount to cover fees on top of your debts¹⁷.

An IVA is not the only route, and the alternatives have their own protections. A debt relief order means creditors must stop all collections activity, are not allowed to add interest and charges, and cannot take further action against you¹⁸. In Scotland, the Debt Arrangement Scheme can protect you from creditors making you bankrupt, or using court action against you to enforce your debts¹⁹.

If a provider closes, that does not cancel what you owe: if this happens to your provider, this won't cancel your debts²⁰. Debt collection agencies are not bailiffs and have no special legal powers, with the same rights as the original creditor²¹. Solicitors must follow rules from the Financial Conduct Authority when dealing with debts regulated by the Consumer Credit Act²².

Who pays for debt advice if packagers cannot take referral fees

Free advice is funded in different ways depending on the route and the nation. In Scotland, all fees for a debt payment programme under the Debt Arrangement Scheme are paid for by your creditors²³, and a continuing money adviser may not charge the debtor a fee for the adviser's services where the debtor in the programme is an individual²⁴.

Charities provide free help directly. Free IVA help is available from any registered debt charity such as Debt Advice Foundation⁵. Debt Justice cannot provide debt advice and recommends getting in touch with free services²⁵. There are free advice services that can help³.

Fee-charging debt management companies still exist and are regulated. All fee charging debt management companies have to follow the rules and guidance given by the Financial Conduct Authority in the Consumer Credit sourcebook (CONC)²⁶. Some debt management companies charge for debt management plans²⁷. Where a fee is charged, the FCA's rules require that any fees they charge are fair²⁸.

Are debt packagers regulated by the FCA?

Debt advice is regulated. The FCA regulates financial advice, including debt advice by fee-charging debt management companies and charities³. All debt management companies must be authorised for debt adjusting and debt counselling and adhere to FCA regulations⁴, and all debt management providers must apply to the FCA for authorisation²⁰. The FCA does have rules in place for debt management plan providers³⁰.

The debts themselves are mostly regulated too. Most types of personal debt, such as credit cards and loans, are regulated by the Financial Conduct Authority²². The FCA regulates credit products including credit and store cards, payday loans, personal loans, overdrafts, mortgages, hire purchase, and any other debts covered by the Consumer Credit Act³. Payday lenders must be authorised by the FCA, which publishes a list of licensed lenders on the FCA register³¹. Licensed moneylenders are regulated by the FCA and must follow their codes of practice³².

For a debt management plan in Northern Ireland, the provider must be licensed by the FCA⁶. Debt collection agencies in the UK are mostly regulated by the FCA, hold a valid consumer credit licence, and are members of trade bodies such as the Credit Services Association³³.

Where to get help, and what to do if a referral went wrong

Free and impartial help is available. Your adviser will check if you can claim any benefits and help you apply, and can help with crisis grants and charity funds, budgeting, negotiating with creditors, and recommending formal debt solutions such as a debt management plan²¹. Debt advisers can help you contact the organisation you owe money to and help you agree a payment plan with the organisation³⁴. Many creditors and debt collection agencies have special teams dedicated to vulnerable customers³⁵.

If you think a firm misled you or charged you unfairly, the Financial Ombudsman Service can look at complaints about credit broking, including being charged a fee for finding a loan, fees not refunded when no loan was taken out or offered, and being misled or not correctly informed about the loan's terms or cost¹¹. The Ombudsman's reach has limits: in some markets, policies may involve insurers, brokers, property managers and others whose firms may not be regulated by the FCA, meaning the Ombudsman cannot investigate the part they played³⁶. That is why checking whether the firm you dealt with is FCA authorised matters before you sign anything.

If you are already in an IVA and want to understand what it commits you to, the starting point is what the arrangement does: creditors should stop charging interest and stop chasing you⁶, and the arrangement applies to all creditors once more than 75 per cent by value accept it¹⁴. If you are weighing up an IVA against other options, the debt guide sets out the alternatives, and how debt advice and debt management firms are regulated explains the rules that apply to the firms you deal with.