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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Toothless 'Debt Resolution Forum'

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.