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| Annual Report 2007 Executive Summary This annual report comes at a time of great uncertainty about the world and the UK economic outlook. A serious economic slow-down could lead to significant increases in both personal and corporate insolvencies. Against this background we are concerned by the sharp increase at the end of last year in the number of personal debtors who are being denied debt relief by the refusal of some creditors to accept their proposals for Individual Voluntary Arrangements (IVAs). We believe that the legitimate concerns voiced by creditors about the operation of IVAs have been met by the agreement reached in January by the insolvency profession and the British Bankers Association on a Standard Protocol for handling consumer IVAs. We accordingly call on the creditors to respond by treating all IVA proposals, which conform to the Protocol, on their merits whenever they provide a better return to the creditors than bankruptcy.
Following some independent research that we commissioned, the IPC calls for Insolvency Practitioners (IPs) and their regulators to ensure that all personal debtors can have access to an independent consumer-friendly complaints system which has the power to award redress where appropriate. Our main recommendations this year are that: • The Insolvency Service and the regulators should publish annual statistics showing aggregate completion and failure rates of IVAs set up in each of the previous five years and the equivalent statistics for each IP and the firms they work for. In the longer-term the Insolvency Service should also provide regular information to the regulators on the financial outcomes of all IVAs; • The Insolvency Service and the regulators should work together with the creditors and their agents to collect and publish similar statistics from debt advice firms on the performance of informal debt management plans; and • The insolvency regulators should require their IPs to ensure that their firms’ complaints handling systems include an option for making redress (whether financial or otherwise) when a complaint by a personal debtor is upheld. The Insolvency Service and the regulators should also take steps to ensure that any personal debtor can take a complaint against any IP relating to poor debt advice or unsatisfactory management of debt problems to an independent arbiter, who can award appropriate redress when the complaint is upheld. We also repeat the concern we expressed in last year’s report relating to the reduction in the financing made available by the government for the investigation by the Insolvency Service of the reports produced by IPs into the conduct of the directors of insolvent companies under the Company Directors Disqualification Act 1986. We continue to believe it is essential that: • all adverse reports by IPs containing prima facie evidence of misconduct by directors under the Company Directors Disqualification Act 1986 should be investigated, so that sanctions can be taken, where appropriate. The IPC plans to continue to follow up these recommendations during 2008 through discussions with all the relevant organisations. During 2007 the IPC participated as an observer in the IVA Forum meetings set up by the Insolvency Service and the British Bankers Association to simplify and improve the management of IVAs. We also accepted an invitation to be an observer on the IVA Standing Committee that was formed last year to oversee the agreement reached in the IVA Forum between the insolvency profession and the major creditors. Many of the points agreed by the IVA Forum are in line with recommendations we have made in previous years. Within the Standing Committee we are pressing the case for better information and statistics to be made available to all market participants on the pros and cons of different types of debt solution. The IPC continues to respond to consultation papers on insolvency matters. In keeping with our view that there is a case for stronger co-ordination within government to ensure a more coherent strategy for debt advice and proposed solutions, we argued against the then Department of Constitutional Affairs’ (now the Ministry of Justice’s) proposals to introduce Enforcement Restriction Orders, which we believe will add further complexity to an already confused market place. IPC members had meetings with Citizens Advice and the Office of Fair Trading to discuss misleading advertising and allegations of mis-selling. We have also maintained our continuing dialogue with the Insolvency Service, the Joint Insolvency Committee and the insolvency licensing bodies. |
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