Financial Director report that the Insolvency Practitioners' Association (IPA) will now monitor, regulate and accredit members of a new body called The Debt Resolution Forum that represents the biggest IVA and debt resolution companies in the country.
This seems to be overstating the case because the biggest 'IVA provider' has refused to join and the Department of Trade and Industry has said that it does not endorse the new body.
The head of business recovery at leading regional law firm DWF has already criticised the Forum in a press release saying that this attempt at self-regulation will not have sufficient teeth to punish cases of malpractice.
The Forum's aims are nonetheless admirable. According to the report, the members have agreed to sign up to the body's standards, which include measures to make sure appropriate advice is given to debtors, fees and charges are made transparent and advertising material is monitored.
The 'monitoring' will be carried out by the IPA who will apparently make accreditation visits to all of the Forum's members over the next 12 months. This seems odd because the IPA is already supposed to monitor the standards of the practitioners who are members of the association.
It seems likely that the lesser qualified insolvency practitioners - those who had not first qualified as either accountants or solicitors - would tend to be members of the IPA rather than the other professional bodies and it also seems more likely that these are the IPs most likely to be employed by the 'IVA providers'.
The IPA is already supposed to be 'monitoring' the standards of these members who are acting as 'office holders' in insolvencies by supervising IVAs but perhaps this is where the nonsense begins.
How do the IPA - or any of the other regulatory bodies - discipline IPs who are not partners in traditional insolvency practices and are simply employed by one of the 'IVA factories'? The IPA cannot impose standards on an employer and it seems that the occasions when they might revoke a practitioner's licence are extremely rare.
In the past, the IPA's critics have complained that their monitoring of professional standards is little more than a box ticking exercise and their disciplinary powers certainly seem to be exercised with extreme caution.
According to their 2005 Report, the IPA only had 291 members actually serving as insolvency office holders but they still had to complete investigations into 209 formal complaints that year.
The IPA dismissed 184 of the complaints, issued 9 warning letters and 10 insolvency practitioners agreed to accept reprimands.
In what seems to be the most serious case, summarised as : "Remuneration taken in excess of that approved by creditors (five cases)" the IP was reprimanded, fined £,3750 (easily recoverable from the profits of one IVA) and his activities were temporarily restricted.
There may be mitigating circumstances in this particular case but let's be clear about this. Insolvency practitioners hold the funds paid to them in trust. If they take money that has not been approved by creditors they are breaking the law. This is spelt out in Statement of Insolvency Practice 9 (SIP) and copies can be downloaded from the IPA's own web site.
Breaches of trust and fiduciary duty should rank quite highly on the disciplinary scale employed by any regulator but, if offences as serious as this top out at a reprimand and a £3,750 fine, then it does not bode too well for the IPA's role in this latest bid for self-regulation by the debt industry.
It seems hard to avoid the cynical conclusion that the Debt Resolution Forum will be used by some of the IVA providers as a marketing tool to persuade uninformed debtors that they are regulated by an authority with an impressive sounding name but no power to regulate.
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The Debt Resolution Forum is a farce. They are admitting members with no pre-screening at all. So long as someone signs a piece of paper promising to give best advice they are in. No inspection required and no proof that the firm concerned is fit and proper to operate as a provider of debt services and advice. Many leading ethical IVA providers are refusing to have anything to do with it, e.g. Debt Free Direct and The Debt People. They do not want to be in a club which has disreputable and unprofessional companies as members. Until there is some form of advance inspection regime for potential members, the DRF will not attract the higher calibre of debt firm and therefore will plainly fail to meet its stated aim of cleaning up the IVA sector.
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