The Department for Business, Innovation and Skills: Helping over-indebted consumers - Public Accounts Committee Contents


Memorandum from the Insolvency Practitioners Association (IPA)

  1.  The NAO published its Helping Over-Indebted Consumers Report on 4 February 2010, on which the PAC is due to take evidence from the BIS Permanent Secretary on 15 March 2010.

  2.  The NAO reported that around a quarter of BIS-funded face-to-face debt advice agencies were either refusing new clients or had waiting periods of over one month—and that against a background of an expected increase in demand and increasing pressures on public expenditure. There is no composite data about the numbers of over-indebted consumers who seek advice from the private sector—the NAO Report refers to "the growing role of the private sector": it has been suggested that the numbers at least equal, if not exceed, those who approach funded advice agencies. What perhaps is also not fully recognised is that insolvency practitioners, as well as reputable debt management companies, generally provide initial information, analysis and advice without charge—primarily by telephone or internet which are widely advertised and which seem to be their debtors' preferred delivery channels.

  3.  The NAO recommends that BIS should assess the role that all debt advice providers, including the private sector, could have in meeting government's aims for debt advice—a recommendation which the IPA strongly supports.

  4.  But looking only at advice seems, in the IPA's view, to be looking only at part of the issues in and about helping over-indebted consumers—there is a compelling need to join up all the dots on the landscape and putting in place a coherent and comprehensive debt advice/protection/relief/repayment framework. That was the thrust of the recent IPA Response to the BIS/Insolvency Service Consultation on their proposed Reform of Debtor Petition and Early Discharge Procedures[3]—in summary:

    — While the government has launched various proposals for addressing issues in and about personal insolvency stemming from its multi-departmental Tackling Overindebtedness initiative, there is now something of an impression that these are proceeding as separate, rather than joined up, streams with elements of overlap—for example individual voluntary arrangements, statutory debt repayment plans and administration orders.

    — The debtor bankruptcy application proposal provides the opportunity to, but it singularly fails to, address a more fundamental issue—a continuing gap between the government's broader objectives for and its delivery of a modern insolvency system, oft-stated by Ministers and The Insolvency Service, that "where debtors can pay, they will pay"; that it should provide "fair returns for creditors"; and that "bankruptcy should be the last resort".

    — A single insolvency "gateway" approach would direct debtors into the procedure which delivered fair returns to creditors but without any diminution in protection, relief and rehabilitation, and certainly in relation to "can pay/should pay" debtors—see Addendum to the IPA Response.[4]

  5.  While debt solutions fall outside the scope of the NAO Report, and therefore the matters immediately before the Committee, nevertheless the IPA would invite it to take into account the need for effective and efficient debt solution mechanisms alongside advice provision.

9 March 2010







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Prepared 8 April 2010