The UK’s largest insolvency regulator, the Insolvency Practitioners Association, has introduced unprecedented measures to regulate a new and dynamic area of the insolvency market.
First implemented in January 2019, the Volume Provider Regulation (VPR) Scheme introduced an industry-first regulatory regime for insolvency practitioners who operate large volumes of personal insolvency cases, also known as ‘volume IVA providers’.
A series of landmark changes were introduced under the scheme to ensure continuous monitoring of volume IVA providers, such as making all insolvency firm data easily accessible to the Insolvency Practitioners Association (IPA), introducing remote monitoring of providers and increasing the number of in-person visits to insolvency firms.
Figures provided by the Insolvency Service reveal that the number of consumers turning to Individual Voluntary Arrangements (IVAs) as a solution to problem debt has risen dramatically, from around 41,531 new cases in 2015 to 79,179 new cases by the end of 2019. This is an increase of approximately 91%. To meet the momentous increase in the number of cases, firms administering IVA arrangements have increased in size and the market is now controlled by a handful of insolvency firms. The scheme was introduced as a response to these changes in the market to ensure that confidence is instilled in this area.
Which volume IVA providers were part of the scheme?
- Aperture Debt Solutions
- Creditfix Limited
- Freeman Jones Limited
- Hanover Insolvency Limited
- Payplan Partnership Limited and Payplan Bespoke Solutions Limited
- Vanguard Insolvency Practitioners Limited
Protected Trust Deeds (PTD), rather than IVAs, are administered in Scotland. In July 2019, the scheme was extended to cover the following volume PTD providers in Scotland:
- Carrington Dean Group Limited
- Payplan Scotland Limited
- Wilson Andrews Limited
How were volume IVA providers monitored before the scheme?
- Before the scheme was implemented, IVA providers with over a 2% market share were subject to an annual visit from IPA. In 2014, this was any firm with over 1,500 cases. From 1st January 2020, the 2% market share is any firm with more than 5,500 cases.
- The annual review would last approximately two weeks and included an extended period of offsite call reviewing. According to David Holland, IPA’s Chief Inspector, inspection reports generated from the two-week inspection were often lengthy which meant that it took IPA’s regulatory committees extended periods of time to process the reports. As a result, flagged matters were often not resolved until IPA’s next annual visit to the insolvency firm.
What changes were introduced by the scheme?
- Up to four focused reviews of each firm per year (alongside the annual inspection)
- Bespoke investigations into identified areas of concern
- Quarterly advice call monitoring
- Monthly data returns submitted to IPA by each firm
- Annual accounts, details of the providers’ corporate structures and other data provided to IPA as required
- Quarterly meetings between volume IVA providers and IPA representatives
- Monthly calls held between IPA representatives and IPA’s chief inspector
- Website reviews
What were some of IPA’s key focus areas during the first year of the scheme?
- Income and expenditure (I&E) reviews – IPA has been working with insolvency practitioners to streamline the I&E process.
- Case progression – a number of focused reviews on case progression were carried out to ensure that individual IVA cases were being progressed in a timely manner.
- Annual reporting – IPA has been examining annual reporting to creditors and consumers to ensure that reports are issued within the statutory timeframes and include the right content.
- Closures/ Failures – during inspections, IPA reviewed a selection of cases that failed. The main reasons for failure were consumer non-compliance with the terms of the arrangement or a change in the consumer’s circumstances that meant the IVA was no longer suitable.
What factors does IPA believe are changing the insolvency practitioner profession and the IVA sector?
- Increase in IVA and PTD numbers – the number of IVA and PTD cases has increased exponentially over the last decade.
- Fixed fee – The majority of volume IVA providers are now proposing IVA arrangements on a fixed fee basis. Many creditors and creditor groups appear to prefer this model.
- IVA Protocol – the IVA Protocol is currently being redrafted by the IVA Standing Committee to ensure it is up to date and fit for purpose within the current market. The aim of the protocol is to make sure that processes involved in an IVA are clear and fair.
- Ethics Code – the Ethics Code for Insolvency Practitioners has also been modernised and is due for release in May 2020. The Ethics Code is intended to help insolvency practitioners in meeting the obligations expected of them by providing professional and ethical guidance.
- Trust Guidance – IPA has issued guidance detailing how insolvency practitioners should deal with work unrelated to insolvency.
- Advisory Notices – IPA inspectors can now issue formal notices to insolvency practitioners to highlight areas of required improvement.
What are the focus areas of the scheme in 2020?
- Failure rates – IPA will be examining failure cases to identify whether there are any links between early failure cases and the initial advice given to prospective clients, client vulnerability and other factors.
- Marketing and advertising – IPA will continue to review reports provided by volume IVA providers on their advertising and marketing activity in order to ensure it remains appropriate.
- Work introducers – IPA will continue working with the Financial Conduct Authority (FCA) to share both intelligence and training ideas to improve the advice given to prospective clients. IPA is also working with the Insolvency Service (IS) to issue a formal requirement that introducer must be FCA regulated.
- Statements of Insolvency Practice 3.1 – IPA will continue to review the advice given to prospective clients during calls.
- Complaints – IPA’s complaints team will continue to monitor the themes of the complaints received and work with the monitoring team where there is an indication of a systematic, training or competency issue.
How we can support volume IVA providers
At Cerebreon, our fully auditable platform is designed to support volume IVA providers. Our Robotic Process Automation module transforms the way that claims, annual reviews and other forms of financial evidence are processed, whilst our Insights and Analytics technology makes highly accurate predictions about consumer default propensity, empowering you to take early preventive measures to ensure arrangements remains sustainable and suitable for every consumer. We understand that many IVA providers face a huge challenge in obtaining the documentation needed to carry out I&E reviews and so, to transform this process, we are also introducing open banking onto the platform. Finally, Cerebreon’s Data Transmission technology changes the way that you manage and transfer data to creditors and other stakeholders, accelerating data flow and case progression.
Want to find out more about how we can help you? Contact Us
To read the full IPA report, click here.