Guidance

IVA Protocol 2021 Annex 2: Regulatory framework draft

Updated 17 September 2021

A summary of the legal and regulatory framework for consumers

All insolvency practitioners are expected to follow and comply with a legal and regulatory framework, which ensures that there is an effective insolvency profession that delivers fair outcomes for the people and businesses impacted by their work.

The legal framework includes the Insolvency Act 1986 and the Insolvency Rules 2016. The regulatory framework includes the Insolvency Code of Ethics and Statements of Insolvency Practice (SIPs). Below is a summary of what these frameworks require from any insolvency practitioner that you have dealings with, from the point of first contact to the completion or termination of the arrangement.

All insolvency appointments in your IVA, whether as nominee or supervisor, are personal to the insolvency practitioner that you deal with. The insolvency practitioner is ultimately responsible for dealing with your case and for having adequate levels of control in running your IVA.

Insolvency Code of Ethics

Insolvency practitioners should follow the five fundamental principles of Ethics:

• integrity – an insolvency practitioner shall be straightforward and honest in all professional relationships. An insolvency practitioner should not knowingly be associated with any document where they believe it contains false or misleading statements or leaves out required information
• objectivity – an insolvency practitioner should not allow bias, conflict of interest or the undue influence of others to affect professional decisions
• professional competence and due care – an insolvency practitioner should attain, maintain and use up-to-date professional knowledge and skills. This includes taking steps to ensure that those working under the insolvency practitioner’s authority have appropriate training and supervision
• confidentiality – an insolvency practitioner should respect and maintain the confidentiality of information obtained when conducting business. Information should not be disclosed without proper and specific authority, unless there is a legal or professional duty or right to disclose
• professional behaviour – an insolvency practitioner should comply with relevant laws and regulations and avoid acting in a way which might discredit the profession. An insolvency practitioner should not engage in any business which would be incompatible with the fundamental principles of ethics and should conduct themselves with courtesy and consideration

If an insolvency practitioner identifies anything (either before agreeing to take your case, or during its lifetime ) which might cause them to breach the above principles, they should take steps to reduce the risk of such a breach. If the insolvency practitioner is unable to successfully address the issues, they should end their involvement in the case.

Statement of Insolvency Practice 3.1 (Individual Voluntary Arrangements)

This SIP is an essential standard your insolvency practitioner must adhere to. The main principles are:

• an insolvency practitioner should differentiate clearly between the stages and roles that are associated with an IVA (these being, the provision of initial advice, assisting in the preparation of the proposal, acting as the nominee, and acting as the supervisor) and ensure that they are fully explained to you
• an insolvency practitioner should ensure that they provide information and explanations to you about all the various options that are available to deal with your debt. They should also set out the advantages and disadvantages of each. These should be clear enough for you to be able to decide whether an IVA is the best solution for you and this should be confirmed in writing
• an insolvency practitioner should explain your responsibilities and the consequences of an IVA
• where an IVA is to be proposed, an insolvency practitioner should be satisfied that it is achievable, affordable for you and that you will be able to meet all your obligations. In relation to advice, an insolvency practitioner should set out clearly to you what may happen if an IVA is not approved or not successfully completed

A meeting should always be offered (either face-to-face, including by video-conference, or by telephone depending on circumstances of the case). The insolvency practitioner should be satisfied that you understand the process, the requirement to co-operate, and the consequences of not doing so.

Records of your discussions detailing the above, and comments you have made, including your preferred option to deal with your debt, should be maintained. If appropriate, summaries of these discussions should be sent to you. Your consent should be sought on any modifications to the original proposal put forward by creditors, and the insolvency practitioner should ensure that you understand the impact of these changes. Your consent must be recorded. In the absence of consent, the IVA cannot proceed.

Any enquiries you make to your insolvency practitioner or their staff should always be dealt with promptly.

SIP 9 Payments to Insolvency Office Holders and their Associates

Creditors and others with a financial interest in the level of payments from your IVA should be confident that the rules relating to approval and disclosure of an insolvency practitioner’s fees and expenses have been properly complied with.

Payments to your nominee and/or supervisor or their associates, and expenses incurred, should be a fair and reasonable reflections of the work undertaken, and that work should be necessary to your case. Information provided by an insolvency practitioner should be presented clearly and consistent, and be useful to your creditors.

Financial Conduct Authority (FCA) Principles for Fair Treatment of Customers

FCA regulated firms, which your IVA provider is likely to be (but you will need to check), are responsible for ensuring you are treated fairly and there are six principles that firms should aim to achieve to ensure fair treatment of their customers:

1. you should be confident that you are dealing with firms where the fair treatment of customers is of central importance
2. the products and services offered are designed and targeted to meet your specific needs
3. you are provided with clear information and are kept informed at all times
4. where advice is provided, it is suitable and takes account of your circumstances
5. you are provided with a product that is you have been led to expect, and a service at a standard you have been led to expect.
6. you do not face unreasonable barriers imposed by the firm to make changes to the product or make a complaint

Insolvency practitioners should ensure that they follow the FCA’s published guidance when dealing with customers. The FCA has also published guidance for those providing debt advice to customers with vulnerabilities. This has been further supported by the recognised professional bodies for insolvency practitioners IPA guidance and ICAEW guidance and further information.

Additional services that you may be offered

Insolvency practitioners should not offer advice on, recommend or make referrals in respect of, any regulated financial products or service for which they or their firm do not hold the appropriate authorisations from the FCA. This includes, but is not limited to, life insurance, health insurance or payment protection insurance.

Insolvency practitioners providing debt advice under the exclusion under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 must ensure that their advice does not exceed the limits of that exclusion at any time in their dealings with consumers.

Insolvency practitioners or their firms who are authorised by the FCA to provide any additional advice and/or services must ensure compliance with the provisions of the Insolvency Code of Ethics in respect of any referral fees or commissions that may be received.

Complaints

If the you feel that your insolvency practitioner has failed to comply with any legal or regulatory requirements, or you are otherwise dissatisfied with the conduct of the insolvency practitioner during your IVA, you should raise this directly with them. If they are unable to resolve your concerns you can then make a complaint to that insolvency practitioner’s authorising body, via the Insolvency Service’s Complaints Gateway portal. Further information can be found here , or by searching “how to complain about an insolvency practitioner” on GOV.UK.

Section 263(3) Insolvency Act 1986 also provides a route for you or your creditors to challenge a decision made by the supervisor of your IVA through the Court. It is recommended that you consider seeking independent professional advice before exercising any recourse to the Court.