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Chairman's Report
The remit of the Insolvency Practices Council is to ensure that the public interest is properly reflected in the standards and practices of the insolvency profession. In this context, it is relevant that licensed insolvency practitioners have a monopoly right to conduct statutory insolvency processes. Since IPC was set up in 2000, we have looked closely at a number of areas of insolvency practice and consulted widely both with the profession and with those who come into contact with it. We remain of the view, as I said last year, that the great majority of IPs do a good job in what are, by the nature of the case, difficult circumstances.
Despite this we continue to see evidence of poorly performing IVAs and fees that take a disproportionate amount from the debtors’ contributions. The IVA is a highly complex and formalised process, which may not be suitable for a large number of consumer debtors. In many cases the right solution might be bankruptcy. There will always be those who for one reason or another will prefer some sort of arrangement. In this context, we welcome the thought being given from inside the profession and elsewhere to devise a simpler and cheaper process and note with interest the Debt Arrangement Scheme, which is shortly to come into force in Scotland. In the corporate area, the issue which constantly comes up, is the question of costs and fees.
The IPC regards this as a matter for concern; not least because, if the profession came to be generally perceived as a gravy train, this would be (a) detrimental to its reputation in general and (b) grossly unfair to the majority of IPs whose fees are entirely reasonable bearing in mind the nature of the work that they do. The work is complex and highly specialised; inevitably it is expensive. The IPC realises that. What we believe is the issue is not high fees and costs in themselves – they may well be justified by what has to be done – but whether the fees and costs incurred actually give value for money. This is, of course, a notoriously difficult notion to pin down but we believe IPs need to be as open and transparent as possible in setting out what they propose to do and why, so that creditors can take properly informed decisions.
The maintenance of high standards requires effective regulation and monitoring. If regulation is to be effective it must be pro-active. This is not easy to achieve with a plethora of regulatory bodies. In particular, pro-active monitoring is needed to identify any failure to observe best practice, even when no complaint is lodged. Such monitoring will require experienced, high quality staff who do not come cheaply. But failure to regulate, and to be seen to regulate effectively, would be very damaging to the profession and to the whole structure of delegated self-regulation. The present system of multiple regulatory bodies is a legacy from the past, is not ideal, and does not make for an entirely level playing field. For it to be effective, the various regulators need to work together in a co-operative manner. There are signs, however, that such co-operation is unravelling.
The IPC views this with concern:
fragmented regulation is unlikely to be pro-active and effective regulation.
The IPC has been in existence for 4 years; in that time we have made a
number of recommendations to the profession, most of which have been or
are being implemented. Four further recommendations are included in this
report. But the IPC’s role should not be viewed solely in terms
of recommendations. Equally important is that our presence ensures that
the attention of the insolvency profession is drawn to issues of public
interest in relation to standards and practice.
G E A Kentfield
Chairman
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