Creditors remain nervous about the lack of a protocol for debt management plans (DMPs) and regulation of the personal insolvency sector is set to intensify further in future, according to a panel of practitioners (IPs) at the Insolvency Today Conference.
At the same time, tensions remain high between the Insolvency Service and IPs over the distribution of personal debt cases, with Mark Sands, national head of bankruptcy at RSM Tenon, arguing that the Insolvency Service is holding onto some bankruptcy cases which private IPs are well placed to handle.
All these factors will combine to create a smaller, more competitive market for debt management providers, the panel agreed.
John Hall, group development director at insolvency firm Invocas, said the political climate would lead to the personal insolvency market consolidating in a similar way to the mortgage broker market.
“The Office of Fair Trading has been flexing its muscles,” he argued in reference to the regulator’s recent scrutiny on the compliance standards of debt management firms.
“The Debt Resolution Forum and DEMSA have made good strides introducing education but is that going to be enough? In future, there will be a vastly increased cost of compliance and the increase in regulation will lead to more consolidation.”
While consolidation is a potential threat to debt management providers, a creditor on the panel said it was not necessarily a bad thing.
“Where there has been consolidation, I think what that has helped is to improve standards,” said Gary Jones, UK head of recoveries and litigation at HSBC.
“We see now that struggling customers are more aware of their options. Consumers are well equipped, so while consolidation is going to happen, I cannot see it significantly affecting the access to solutions for customers.”
By Alex Cardno