Trade Group R3 Speaks Out - Nick O'Reilly

When I heard last week that Capital One had announced it would refuse IVAs with fees totalling more than £4,500, I was staggered.

Why? In effect, Capital One was calling for IVA fees to be capped under a one-size-fits-all approach. It was perfectly within its rights to do so. But such an attack on insolvency practitioners by an individual financial institution at a time when an industry-wide body is contemplating wholesale changes seems extraordinary.

Some financial institutions simply do not understand the work our members do. To make such a pronouncement a week ahead of an industry-wide forum called to thrash out all the issues around IVAs proves the point. Given that we represent 97% of this industry, we will not let this go unchallenged.

As you may know, the meeting was due on 31 May. We at R3 will have sat down with organisations including the British Bankers’ Association, the Insolvency Service and all the other major interested parties, with the shared aim of developing proposals covering not just IVA fees, but also other crucial issues such as how they are marketed.

We oppose fee capping not just because it’s unfair to our members but because it will be unfair to consumers and our creditors too. Given the imminence of that meeting, you might think Capital One’s intervention unhelpful, or at best irrelevant. It also appeared timed to highlight the fact that whatever might be agreed at the meeting, the proposals may not be universally accepted. That’s the prerogative of operators in a free market.

The reason why a capped approach to fees does not work is that every IVA reflects a unique set of circumstances and needs. Advising on an IVA is not a standardised process suited to a one-size-fits-all fee structure. Such a message does our members a great disservice.

I also think it is a message that may backfire on its source. If the fees for an IVA are capped at £4,500, then a lot of practitioners will simply leave the IVA marketplace. The result will be less choice for consumers, and many people who could have done an IVA will go bankrupt instead. And if they go bankrupt, then companies like Capital One will actually get less of their money back than under an IVA.

As we all try to seek out the best way forward for IVAs, I would be delighted to sit down with Capital One – as with every other interested party with something to contribute. But until we have done that, I think we should all focus on formulating our ideas rather than trying to grab the limelight.

Nick O’Reilly is vice president of Insolvency group R3.


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