Business minister Jenny Willott has today (17 February) announced proposals to change the way insolvency fees are charged.
Following the completion of research undertaken by Professor Elaine Kempson into insolvency practitioner (IP) fees, the proposals could see a limitation to charging by the hour, or the institution of fixed fees agreed upfront.
Willott said: “We need to make sure that creditors are getting a fair deal and not losing out through excessive charges by practitioners.
“That is why an effective framework, which everyone has confidence in, is essential to a strong and efficient insolvency industry.
“These new powers for the Insolvency Service will make sure that they have the right tools to tackle rogue operators and enforce these new rules.”
The proposals, part of a consultation to be carried out over the next six weeks, have been designed to “give the Insolvency Service stronger powers to effectively monitor and regulate practitioners and industry regulators.”
The measures also include objectives to “strengthen the regulation of insolvency profession and give the Insolvency Service the power to enforce them” and bring the regulation of IPs “into line with other regulatory systems, such as for auditors”.
Giles Frampton, vice-president of insolvency trade body R3, said the proposed changes are a “serious concern”.
Frampton said: “While we welcome the Government’s proposals for improving regulatory oversight of fees and for boosting information for creditors, we have serious concerns about the suggestions for amending the way insolvency practitioner fees are set in the absence of secured creditors.
“These proposals will have unintended and unwanted consequences, and it would be the UK’s creditor community that would lose out were they to be implemented.
“The Government’s own report says that the market for insolvency practitioner fees works well when creditors engage with the process, as usually happens with secured creditors. That being the case, the Government’s focus should be on boosting unsecured creditor engagement, and it should avoid experimenting with the basic fee-setting mechanisms.
“While more can – and should – be done to improve the way insolvency practitioners report the value of their work to creditors, we cannot welcome proposals that would hinder insolvency practitioners from delivering value to creditors in the first place.”