Credit Management Jan:Feb 2019

INSOLVENCY
Trust, transparency,
consistency and confidence
Strengthening the insolvency regulatory framework.
AUTHOR – Michelle Thorp
Michelle Thorp
THE UK’s insolvency regime
is one of the best in the
world according to the
World Bank, returning
money to creditors quickly
and cost effectively. It’s a
regime the UK can be proud of. However,
the evolution of insolvency procedures
means that the regulatory framework must
always be reviewed and strengthened to
keep up with the needs of that changing
environment. A transparent, consistent,
and trusted regulatory framework is
important so that creditors can be
confident in the outcomes of insolvency
procedures. Without confidence in our
insolvency framework, the UK’s business
environment would be a much harder
place to work in.
During my first few months as IPA
CEO, one area that dominated a number
of my early conversations with creditors,
debt charities, the Government, and of
course, the insolvency profession, is that
of how best to regulate those who have
adopted a business model undertaking
high numbers of Individual Voluntary
Arrangements (IVAs).
IVAs (available in England and Wales),
are one of three statutory personal
insolvency procedures available to
indebted individuals, and make up the
majority of personal insolvencies. They
are an agreement between the indebted
individual and its creditors to repay
all (or part) of what they owe, typically
over five years. They are the personal
insolvency equivalent of Company
Voluntary Arrangements (CVAs), which
have featured in the press recently
following the financial challenges that
retailers on the high street are facing. And
like CVAs, IVAs must be supervised by a
licensed insolvency practitioner.
The number of people using an IVA
to deal with their debts has increased
significantly over the last ten years as
rising consumer levels have increased,
with numbers in 2017 exceeding more
than 57,000.
As a response to the rising demand,
and the use of new technology, some
insolvency practitioners have streamlined
the IVA procedure, making it a more
accessible and cost-effective insolvency
procedure than it had previously been.
These firms (volume IVA providers) are
each responsible for at least two percent
of the IVA market (currently just over
5,000 IVAs).
Volume IVA providers have a vital role
to play in ensuring that people can deal
with their debts in the best possible way.
However, their rapid evolution through
the use of technology, has led to questions
from creditors and those who use them
about how they work, and how they are
regulated.
RIGOUROUS REGULATION
Following discussions with creditors,
debt charities, government, insolvency
practitioners, and, importantly, the
providers of volume IVAs themselves,
at the end of 2018 the IPA was able to
announce new measures to strengthen
the regulatory regime. When everyone
involved in an issue recognises that it is
time to change, it is often easy to bring
people together to agree a way forward.
The measures, implemented from
January, will be a far stronger regulatory
regime for those operating in this space.
Our monitoring regime will change,
introducing a concept of continuous
reporting, that will give more detailed
insight into operating practices, and
sharper and targeted reports. We will
be able to get to the nub of issues, and
address them quickly – including in some
cases issuing sanctions.
The features of the new regime will
include: up to four regulatory visits a year
(up from one); bespoke investigations
into particular targeted areas of
concern, looking at far more cases than
we currently inspect; and continuous
monitoring, through monthly reporting
and access to volume provider technology
systems to enable better scrutiny of their
business practices.
These changes will help to ensure that
creditors, and indebted individuals, can
have greater confidence that the services
offered by the volume IVA providers are
regulated well. The changes will be kept
under close review during implementation
and beyond, to ensure that they achieve
our collective aim of stronger regulation.
I am hopeful that this new, intensive,
but pragmatic regime will provide the
assurances the wider community has
been seeking in the regulation of volume
IVA providers’ services.
The IPA’s work to review and
implement new regulatory processes
doesn’t stop with volume IVA providers.
We are also reviewing and implementing
changes that will ensure that regulation
is strengthened and consistent across all
insolvency procedures. As part of that
work, we are keen to hear the views of the
creditor community, so please do pick up
the phone and let me know about your
experiences of insolvency regulation.
Whether it’s rescuing businesses and
jobs, ensuring the smooth wind down of
a company, or helping individuals with
debts that have become unsustainable,
the insolvency profession is a vital part of a
successful UK economy. The IPA’s work to
review, evolve and strengthen regulation
will make sure that the profession can
continue its work, and importantly,
ensure that creditors can have confidence
in the UK’s insolvency regime.
Michelle Thorp is CEO, Insolvency
Practitioners Association.
The Recognised Standard / www.cicm.com / January / February 2019 / PAGE 12