The last two years has been a period of significant growth and change in the Individual Voluntary Arrangement and Trust Deed market. Looking back through the last decade at the drivers behind volume changes, you can’t help but see the pattern which makes it clear that now is the time for more regulatory change.
In the lead up to 2006 the UK experienced an explosion in personal insolvency volumes driven by changes in legislation and the resulting emergence of ‘factory’ type firms commoditising personal insolvencies through mass marketing and production line operational processes. Post credit crunch, volumes fell, mirroring the contraction in unsecured lending/borrowing. The intervention of the FCA in regulating debt management firms from April 2014 saw a further fall in new IVAs and in Scotland TDs. However, since that time, a gradual increase in consumer credit has created a gap in the market which, since the second half of 2015, has been filled by mono-line personal insolvency providers who, unencumbered by FCA regulation, have grown rapidly. Additionally, now that the larger debt management providers have received full FCA authorisation they can once again invest in consumer marketing.
As a result, volumes set to return to, or even exceed, levels seen prior to the credit crunch and it’s time for a step change so that consumer outcomes are protected, creditors have faith in personal insolvency debt solutions.
Over the last 12 months, we have worked with industry regulators to support them in identifying and eliminating the irregular practices we have seen building up in the industry since the second half of 2015. However, there is more to do particularly around transparency in the regulation of the market, and a cross-sector approach is critical if we are to work together to raise overall regulatory standards.
We are asking the Insolvency Service to engage with Regulators (RPBs Recognised Professional Bodies) to deliver both short and long-term change, including the implementation of a single regulator for the personal insolvency sector and the regulation of all firms (not just individual IP level).
It’s important that consumers can access high quality debt solutions including personal insolvency because personal insolvency has the potential to deliver poor consumer and creditor outcomes. However, now is the time for the industry to work together to ensure personal insolvency regulation is enhanced to meet the needs of a changing industry and to bring it in line with the FCA’s regulatory principles.
By Richard Haymes, Head of Financial Difficulties, TDX Group
This is an extract from an article included in our regular round up of news and views from the debt industry, The Debt Review. Sign up to receive a copy here: Subscribe to The Debt Review