Collection House Ltd

Proposals to allow civil servants to act as adjudicators in insolvency cases have been severely criticised.

The reforms suggested by the Insolvency Service would see petitions for bankruptcy and winding up done online rather than via the courts.

The Chief Bankruptcy Registrar, Stephen Baister, described the proposals as “satirical”.  Speaking at the Insolvency Practitioners Association’s (IPA) annual lecture, Baister believed that the move would create more bankruptcies and company liquidations.

He said: “Currently many winding-up petitions result in settlement of the debt, often very late in the process, perhaps after a court adjournment.  Many of those cases in the future could end up with businesses being shut and employees dismissed.”

His concerns included the transparency of the process as petitions would be removed and civil servants would decide whether there is a dispute or not. 

He added: “Everyone is entitled to a fair and public hearing.  The lack of public scrutiny bothers me.  It may be inconvenient to the government but there is a practical value in a hearing.”

Baister questioned whether a civil servant would have the necessary qualifications, experience and competence to deal with potentially complex areas of law and noted a conflict in placing the adjudicator in the same government agency as the official receiver.

The Government has announced that no changes will be made to the current pre-pack administration regime despite concerns over the transparency of the system.

Insolvency minister, Ed Davey, after consulting stakeholders announced the government is “unconvinced” that introducing further legislative controls would outweigh the burden of new regulation.

Mr Davey has asked the Department for Business Innovation and Skills headed by Dr Vince Cable to review existing controls on pre-packs to see if more can be done within the current framework to improve transparency.  The review is set to be made available for discussion in the spring.

The European Commission (EC) has proposed radical updates to the 1995 EU data protection rules with a view to strengthening online privacy rights and improve Europe’s digital economy.

The reforms will affect the way individuals and businesses use and store information.  However, credit reference agencies are concerned that the reforms will have a serious impact within their industry.  The reforms are regulations which have to be implemented by law and are not open to interpretation by member states.

The proposals would allow consumers easier access to their data and the ‘right to be forgotten’, permitting individuals to delete information if there were no legitimate grounds for retaining it – without exemptions this could also apply to past debt records.  Business will face a single set of rules on data protection across the EU, designed to remove administrative burdens.

Good news and credit cards do not often go hand in hand, however, the Treasury is seeking to restrict excessive fees for purchases using a debit or credit card.

The Office of Fair Trading estimates that over £300 million in ‘card surcharges’ was incurred by consumers for air travel alone in 2010.

The Government is seeking to bring in new European Directives earlier than the 2014 date anticipated.  A consultation will be launched in 2012.

New figures from the Insolvency Service show more people aged between 25 and 34 are turning to Debt Relief Orders (DROs) to deal with their debt problems more so than any other age group.

From a preliminary analysis of 44,000 DROs in England and Wales over the first two years since their introduction (April 2009), show that one in four people with DROs fall into this age group.

DRO figures over the last two years show that one in three people under 25 who were given a DRO owed less than £5,000, whereas all other age groups typically owed more, with some 40 percent of over 25s owing between £10,000 and the maximum allowable debt under a DRO of £15,000.

 The UK Government announced its decision to opt out of the European Union’s European Account Preservation Order (EAPO) on 31 October 2011.

The UK Government, although welcoming the objectives of the proposed regulation, a consultation by the Ministry of Justice revealed a number of concerns, including:

• The threshold for obtaining an EAPO is too low and there is no requirement for the applicant to provide security.
• Potential issues for any companies undergoing restructuring or rescue which could increase the risk of the company becoming insolvent.
• The courts should have more discretion when deciding to issue an EAPO. 

An EAPO would be, if ever adopted, a powerful tool for claimants attempting to recover cross-border debt, both pre and post judgment.

Although the government has not opted in at this stage, it intends to participate in negotiations of the draft regulation in the hope that the UK may opt in post-adoption

The Limitation Act 1980 defines the time period when a creditor can still pursue a debtor for an unsecured debt. Generally, this is six years after which the debt becomes "statute barred". This period can be extended in certain circumstances but if you are sat on a debt portfolio that is growing old then you need to consider doing something about it before the six year period is up or otherwise it might be too late.

You may of course have already written the debt off. This is normally little more than an accounting exercise and does not prohibit debt recovery action from taking place.

Many collection agencies increase their rates for older debts and many others would not go near a debt over one or two years old let alone five years old.

Fortunately, Collection House Ltd does not reject such claims and accepts such instructions on our standard rate of 5% on a no-collection no-fee basis.

Get in touch with us if you too have debts in danger of dying of old age and we will try to install some life back into them.

Labour MP for Makerfield, Yvonne Fovargue, has tabled a bill to force fee charging debt management companies to inform potential clients of the availability of free debt advice.

The hope is that this bill will “…level the playing field” between debt management companies that charge a fee and consequently have large budgets for advertising as opposed to free agencies which put all their resources into providing a service and may be less well known.

The debate comes after the Office of Fair Trading (OFT) took enforcement action against three debt management companies in the past few weeks.  At least 62 companies have lost their consumer credit licenses in the past year.

The Institute of Credit Management (ICM) has launched a petition to prompt a Government re-think on their plans to exempt micro-businesses from having to file accounts at Companies House.

The ICM recently polled their 8000 members on whether they would lend credit to a customer placing a “relatively small order” whose accounts were not available to check at Companies House or via a credit reference agency.

Nearly 37% would not approve the order for immediate supply and would insist upon cash in advance; 15% would accept the risk while 48% would ask the customer to provide financial data to support their application.

The findings support the ICM’s view that businesses should be prepared to supply more information, not less.

To support the survey visit:

http://www.surveymonkey.com/s/8KGN5BH

Trading-related bankruptcies rise in vulnerable industry sectors

Personal bankruptcies resulting from business debts have increased considerably within vulnerable industry sectors, particularly hotels and restaurants where failures have reached their highest level since the recession began, official figures reveal.

The hotels and restaurants sector, which relies on discretionary spending, experienced 368 bankruptcies in the first quarter of this year, with bars accounting for 244 of the total figure.   This was an increase of 10% on the final quarter of last year.

The construction industry has not fared any better with failures increasing year on year with 591 bankruptcies in the first quarter of 2011 compared to 571 in the same quarter of 2010.

These bankruptcies will be sole traders, partnerships and other small businesses not covered by limited liability. 

Total bankruptcies across all trading sectors has hit 2,579 for the first quarter, which is worryingly edging closer to the 2,759 peak recorded in 2009.

The number of investigations launched by the Insolvency Service has fallen by nearly 40% - a drop that the agency has blamed on budget cuts of 11%.

The service’s full-year accounts for the 12 months to April 2011 show its company investigations unit launched 180 cases in this period, a decrease of 39% from the 295 launched in 2009-2010.

The concern is that a lack of resources following budget cuts will further reduce the service’s capacity to investigate rogue company directors.

The latest ICM briefing is available by clicking here.