Review of Recommendations
Unsatisfactory Individual Voluntary Arrangements
‘This recommendation suggested that best practice should be strengthened to ensure that
where an IVA is being considered, the IP should give the debtor a written explanation, signed personally by the IP of all the options open to the debtor, with an indication of the relative advantages and disadvantages of each’.
The profession responded positively to this suggestion going a long way to accepting the recommendation in full by amending SIP 3 and producing a booklet – ‘Is an IVA right for me?’ – which is given to the debtor before the decision is made on the appropriate course of action. We have found it appropriate to revert to the recommendation in 2004 to seek written confirmation of best advice. (See 2004 Recommendations.)
Correspondence between IPs and Debtors/Creditors
‘The JIC should consider setting a standard of best practice to ensure that IPs keep
debtors/creditors informed in a meaningful way of what is happening and that
correspondence from debtors/creditors should be answered within at least 10 working days.
If this is not possible, then a holding acknowledgement should be sent explaining the position and stating when a substantive response might be expected’.
This recommendation was accepted by the profession but not incorporated as a SIP but as a recommendation by RPBs through their newsletters. Whilst the profession reacted quite quickly to this suggestion and there have been signs of improvement, it has to be said that the issue has not been completely resolved and the IPC is still receiving a number of complaints. We have accordingly made a fresh recommendation this year.
Treatment of the Matrimonial Home in Bankruptcy
‘It was recommended that the JIC should set a standard of best practice, which would reduce the uncertainty and unfair treatment that is sometimes evident in the disposal/realization of the equity in the Matrimonial Home in the case of the bankruptcy of the sole or joint owners’.
Following successful lobbying of the government by the Association of Business Recovery
Professionals(R3), the Bankruptcy Advisory Service and ourselves, significant and most
welcome improvements were incorporated in the Enterprise Act 2002 which has made it much fairer for owners of the family home.
Action has to be taken within 3 years of the date of the bankruptcy thereby reducing the opportunity for long-term speculation by IPs of inflation increasing the value of properties. These changes only came into force in April 2004 and a review of the effects will be made in 2005.
High incidence of failures of IVAs from a single Insolvency Practitioner
‘Any IP whose IVAs show a high rate of failure at an early stage should be the subject of an investigation by his/her RPB including the source and type of introduction and benefits
received. The JIC should also look at the possible conflict of interest where a supervisor of a failed IVA is subsequently appointed the trustee in bankruptcy’.
We understand that some of the RPBs now collect information about the incidence of early failures of IVAs. Our 2004 recommendation on statistical information proposes a more systematic approach.
Proper and effective resources for monitoring units
‘Monitoring units of all the RPBs need to be properly and effectively resourced to maintain the high standards expected from the profession is self-regulation is to be maintained. The JIC should look into the effectiveness of the various monitoring bodies’.
At the time the IPC was assured by the JIC that the monitoring units were properly resourced. Since then there have been significant changes to the way the majority of IPs are monitored. This is an ongoing issue – see also the 2003 Recommendations and the Activities of 2004.
Fees and Disbursements
‘We recommend that the IPs should give a clear indication in writing in advance of the likely costs and charges especially in relation to I VAs’. The amendments made to SIP 9 have gone some way to resolving this issue. We still retain the concerns about ‘Value for money’ as expanded on in our 2003 Report and again this year.
Simplification of the insolvency regulatory structure
We recommend that the RPBs give urgent consideration to seeing what can be done to
simplify and speed up the regulatory processes. We also recommend that the Insolvency Service should cease to license IPs directly, as in our view, this role is inconsistent with its role as Regulator of Regulators.
The profession’s initial response was that what was needed was co-operation between the
RPBs. Such co-operation, however, has recently shown signs of unraveling. We believe a
strengthened JIC is crucial to the objective of ensuring consistency in all areas of regulation and its enforcement.
We aim to work together with the JIC to achieve this. With regard to the role of the I S in granting licenses to IPs, recent changes to the level of license fees charged to IPs by the Insolvency Service to cover the costs of regulation and monitoring has led a number of IPs to give up their licenses or move to other RPBs.
Statistical information about VAs
‘The JIC should obtain from the RPBs details of all VAs on an annual basis to enable
performance tables to be completed. This should enable a better understanding and proper assessment to be made with action taken where there are higher than average failures. It would be helpful if these statistics could be published’.
Little progress has been made on this so far. (See also the 2004 Recommendation.)
Individual Voluntary Arrangements
‘The IVA as currently structured is too complex and, therefore, too expensive for many cases of personal indebtedness. Consideration should be given by the profession in conjunction with the IS to designing a simpler product, which would suit many more cases’.
We are pleased to report that the IS has created a working group, which is looking into simplifying the IVA process and good progress is being made. A report is expected in
Regulation and Monitoring
‘The RPBs need to adopt a more proactive approach to regulation and not just react when a complaint is made. This may well require an enhancement of the number and quality of
Some of the RPBs reacted strongly to this recommendation; and disputed our claim that there were grounds for improvement. Subsequently, the IPA and ICAEW agreed to wind up the joint monitoring exercise through JIMU at the end of 2004. Each RPB is now running its own and very different monitoring process.
Both state that changes and enhancements have been made. We have held meetings with the two bodies and ACCA and it is appropriate to let this recommendation rest on the table to allow the RPBs to run the new processes for at least a year before assessing the impact of the changes.
Joint Disciplinary Body
‘The RPBs should consider creating a joint disciplinary body in a similar way to that created by the Actuaries or at least a joint fact-finding and investigation unit’. In order to maintain public confidence in the system of self-regulation, the RPBs must show a
consistent approach to disciplinary issues in relation to insolvency practice.
The IPC was and remains concerned that the JIC rejected this suggestion out of hand. However, following a proposal put by the IPA to the JIC in August, consideration is being given by JIC to closer cooperation between RPBs on some of these issues. More information on the proposals put forward by IPA has been requested by the JIC. There is an opportunity for the JIC to take a proactive role in ensuring a consistent approach to disciplinary procedures by the RPBs.
Aged Bankruptcy Cases
‘The large number of old bankruptcy cases being passed out by the Protracted Realisations Unit of the Insolvency Service are being dealt with in many different ways by IPs. There does not appear to be a standard approach and we recommend that the Insolvency Service issues some form of guidance’.
The Insolvency Service reacted promptly to this recommendation and issued additional
guidance to IPs in this very sensitive matter. (See also under Key Activities.)
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