IP Fees to Become More Transparent in October 2015
Employment relations and consumer affairs minister Jo Swinson has this week announced on behalf of Parliament, under the Secretary of State, that Insolvency Practitioners (“IP’s”) must now provide up front estimates of their fees for insolvency cases where fees are intended to be drawn on a time costs basis. This is yet another piece of regulation intended to be brought in with the hope of improving transparency in the insolvency profession but has led to many believing that it is over-regulation at its best.
The new measures are designed to end the uncertainty of unlimited fees being charged to cases so as to ensure that fees remain fair and reasonable. The changes have been proposed following an initial review of IP’s fees by Professor Elaine Kempson on behalf of the Insolvency Service.
Insolvency Practitioner Fee Estimates
From October this year, when the new regulation is proposed to be effected, the fee estimates provided by IP’s are intended to be treated as a cap on the fees approved as chargeable and if time costs exceed the sums quoted, further approval is to be sought from creditors.
Initial discussions suggested that fee estimates may only be required on larger fee level cases, which many considered would be above a threshold of £10,000 (to be in line with SIP 9 guidance on fees which IP’s currently follow) however no such threshold has been given in the parliament’s statement announcing the changes.
I believe that many IP’s will either simply move to a fixed fee agreement which allows them to take the fee agreed there and then (rather than waiting until they have been incurred, or risk receiving less if time costs do not reach the estimate), or they will under estimate their fees (to avoid losing the case to a competitor) then seek approval for increased fees later on, when creditors are less likely to remain interested in voting. Should this happen then not more creditors will get a better deal than before and some will even loose out due to the increased cost of seeking additional approval. However, it remains to even be seen as to whether the proposals will actually come into effect given the potential change in government officials in May 2015 and the only vocal supporters to the proposals being the Liberal Democrats.
Will these changes give you greater confidence in the insolvency profession?
For the latest insolvency news regarding a rise in the fee for issuing civil money claims see HERE.