The Financial Conduct Authority (FCA) has proposed measures to align funding sources for the Money Advice Service (MAS) with the lenders that lead to people needing help.
The proposals were included in a consultation opened this month which sets out a proposed methodology for collecting the MAS debt advice levy from 2018/2019.
The regulator said there is a direct relationship between lending, both secured and unsecured, and the potential for consumers to get into debt, a subset of which can lead to harm through problem debt.
The current recovery of debt advice funding is split between the deposit takers fee block and the home finance providers and administrators fee block. Both blocks fund 44 percent, while the consumer credit fee block funds 12 percent. The total debt advice funding for 2017/2018 is £48m.
Under the current methodology some firms such as credit card companies, which carry out significant amounts of unsecured lending, are not contributing to the 44 percent of debt advice funding recovered from deposit takers.
The watchdog said these firms only make a contribution to debt advice funding which is recovered through the existing consumer credit fee block.
This means credit card companies pay a relatively small proportion of the levy despite representing a large proportion of total unsecured lending.
The FCA has proposed that the figure needed for funding debt advice in 2018/19 will remain the same, but the money recovered from deposit takers will instead be recovered from a new fee block of firms that undertake consumer credit lending.
This means the funding will be split 50/50 between the home finance providers and administrators fee block, and the new consumer credit lending fee block.
The FCA said: “Our proposals align the funding of debt advice more closely with the actual lending firms do, but it will mean some firms will pay a larger levy than they do now.
“We believe the new approach is fair to firms and better meets our policy intention that firms who provide secured and unsecured lending should fund the MAS debt advice work.”
The proposal will be open to conusltation until January 1 2018 and the results will be published in March 2018.
Earlier this year, Amber-Ainsley Pritchard interviewed Caroline Wayman, chief ombudsman and chief executive of the Financial Ombudsman Service, about fairness across the industry.