I was invited by the Insolvency Practitioners Association (IPA) to be a panellist at their Annual Personal Insolvency Conference held at the Etihad Stadium, Manchester on 30 November 2017.

The Panel Session was entitled “Variation, Fees and Expenses – What are the Issues?” which covered some of the most topical and divisive issues in the current IVA market.

Green v Wright and volume IVA providers

The first topic was the implications for IPs, debtors and creditors of the decision in case of Green v Wright. This landmark ruling basically provides that PPI redress awarded to a debtor even after an IVA is “successfully” completed is still due to be paid into the IVA for the benefit of creditors via further distributions.

I was able to present the practical difficulties of this decision for volume IVA providers. For example, in many such cases which were completed several years ago, the creditors or their agents will have closed the associated accounts and will not be in a position to accept further dividends, which would then lead to monies having to come back into the IVA and most probably returned to the debtor anyway. The representative from the largest creditor voting agent agreed that this was very likely.

I raised the further issue that the IVA Supervisors will be “out of office” and will not have any bonding (insurance) in place to cover the handling of these funds.

Guy Withey at IPA Personal Insolvency Conference 2017

Early exit models in IVAs

The next topic concerned the “early exit models”: this is in respect of certain lenders now offering loans to debtors in an IVA to allow an early settlement of their arrangements: This issue had arisen in last year’s conference and resulted in a fairly heated debate about potential conflicts of interest between the IPs and the connected companies offering these loans.

The consensus this year was that the products now available could be more suitable but I and the other IP on the panel noted that the IVA Supervisors would have to ensure that the debtor was fully-informed about the consequences of taking further credit before any proposal was put to creditors to complete the IVA early.

Harrington Brooks at the IPA Personal Insolvency Conference 2017

Current fee models in the IVA market

The final topic was one which is currently the hottest issue amongst IPs – how are current fee models impacting on the IVA market?

By way of background, since September/October 2017, new fee models for IVAs have been presented by The Insolvency Exchange (TIX) and IVA Watch (Watch), who between them are voting agents for the majority of creditors. These effectively limit either the fees or disbursements chargeable by IPs.

Whilst being somewhat restricted in what could be said to avoid any “price-fixing” allegations, it was clear that the two new models are causing considerable operational difficulties for IPs. From a volume IVA provider’s perspective, I made it clear that, particularly in respect of TIX although also with certain aspects of the new Watch model, there had been no prior warning of these new models and it was unreasonable to expect IPs to be able to comply with them straightaway.

I also commented that, where the two new models were also having to be accepted alongside the significantly conflicting old models (still being presented by the majority of TIX’s creditor clients), this could result in significantly lower fees and disbursements being payable to the IPs than actually envisaged by the voting agents.

TIX’s representative on the panel confirmed that they had received a great deal of feedback from IPs and that the model was effectively a trial which may result in changes to the models in the future.