IPA supports new IP-lite

Financial Director report that the Insolvency Practitioners Association (IPA) has become the second insolvency practitioners licensing body to move towards creating a so-called ‘lite’ qualification for people focused only on the UK’s rapidly expanding debt management industry.

According to the report, IPA chief executive Nick Sabin said the move is another step towards better policing of the much-maligned debt management industry, following the IPA’s recent appointment as the body charged with regulating the newly formed Debt Resolution For

Sabin said the proposal, which was made to the DTI, is crucial in managing the huge number of IVA proposals effectively. Upcoming changes to the IVA process will make them quicker, easier and simpler to undertake.

He is also quoted as saying:

‘Limited licensing is in that same spirit. A number of practitioners could think it would devalue the brand, but the growth in personal indebtedness means it has become an industrial process, and I can’t see this reducing in the near future. In the interests of all, we need some specialism.’

According to the report, Sabin believes that managers within accounting firms handling vast numbers of IVAs on behalf of an IP would be ideally placed to take the qualification.

‘An IP acts as nominee and supervisor for several hundred debtors, but the tier below them is manager level – some of whom have 20 years of experience as managers. They’re interested in a limited license as they can’t get a full license without corporate work'.

Whose fault is this ?

For years, junior staff and managers with lower level entry qualifications have been encouraged to take the Certificate of Proficiency in Insolvency (CPI) exams. According to the R3 careers brochure, the exam is designed for staff for staff working full time in insolvency who 'do not necessarily intend to become licensed insolvency practitioners'.

The brochure says the exam is a basic test of insolvency competence and consists of a single three hour paper but questions on personal insolvency only account for approximately one third of the marks and corporate insolvency about two thirds. It would have taken no great effort from the IPA to introduce a certificate of proficiency in personal insolvency for the managers specialising in this lower prestige work.

There are also no industry-wide recruitment standards which makes achievement of the CPI qualification essential for the personal insolvency managers who currently carry out the work of 'supervising' IVAs on a day to day basis. That could be a first step but using an 'IP-lite' qualification as a relatively quick - five year ? - conversion route to creating hundreds of licensed personal IPs will not address the problem of regulation.

Sabin said that managers in accounting firms handling vast numbers of IVAs would be ideally placed to take the qualification but accounting firms do not handle the work of the IVA factories and most of the problems with the "much-maligned debt management industry" are caused by the initial mis-selling of IVAs, not by the day to day management of the arrangements once they have been sold.

IP-lite might well increase the membership of the IPA and it might also improve the professional standing of personal insolvency managers but it sounds as though Sabin is proposing IP-lite as a solution to a problem that it cannot resolve: the commission based sales advisors who are actually selling IVAs and the already qualified insolvency practitioners who are signing off that process.

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See previous posts on IP-lite and The Debt Resolution Forum.

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'IP-lite' providers for IVAs.

IVA co.uk provide an online forum on IVA matters and it was interesting to read (belatedly) the IVA News blog posted on their site about proposals from the Institute of Chartered Accountants in England and Wales (thankfully known as the ICAEW) for a new qualification dubbed 'IP-lite'.

We posted our initial comments on the site but they're worth repeating here because it sounds as if the ICAEW may be trying to lighten a sector that is already top heavy with lightweights.

The IVA News blog quotes reports that a new insolvency qualification is being prepared that will distinguish professionals undertaking IVAs from those doing other types of insolvency work and could see IVA specialists - with a lesser qualification - being hived off from the insolvency profession.

The report says that a controversial aspect of the plan includes the possibility of revoking the full licenses of qualified insolvency practitioners focused on IVA work and giving them the lesser IVA qualification instead.

Surely the proposal to remove the licences of the IPs who specialise in personal insolvency - particularly IVAs - would make a nonsense of both the Insolvency Act and case law relating to IVAs ?

IPs are officers of the court and they are, at least technically, only supervising IVAs on behalf of the courts. The way the law works at present, an IP supervising an IVA is protected from civil legal action so long as he acts within the insolvency laws and the terms of the voluntary arrangement.

That's why complaints about the actions of supervisors have to be made on application to the County Court under s.263 of the Insolvency Act and the courts are supposed to deal with with these applications as insolvency matters.

If you remove the IPs licence then you probably also remove their statutory protection and statutory regulation and, as a result, supervisors in IVAs will be exposed to civil legal action whilst carrying out their duties.

Perhaps we should welcome that - it would certainly make legal action against IPs a lot easier - but I suspect that the proposals for an 'IP-lite' qualification only arise because the ICAEW are seriously underestimating the potential complexity of personal insolvencies.

If the ICAEW are simply proposing that 'IVA advisers' should be better qualified - if not formally qualified - no one would disagree with that but the creation of a two-tier insolvency profession as a solution to the problems surrounding IVAs sounds more like an act of expediency rather than a serious solution based on clear understanding of the problems.

Perhaps there is a hidden agenda here. Introduction of an IP-lite qualification and removal of the licence would also require a change in regulation and the ICAEW would no longer be responsible for any of their members who might be dealing with 'lighter' (less serious?) personal insolvency business rather than heavyweight corporate insolvencies.

With the upsurge in bad publicity about the mis-selling of IVAs, it seems worth asking if this proposal is really the ICAEW's way of trying to wash its hands of the whole business by shifting the regulation of personal insolvency practitioners elsewhere ? If so, perhaps that should also be welcomed - so long as it is a step towards setting up a new independent regulator.