Debt regulation may be years away

The Insolvency
Practitioners Association
has warned that the
Office of Fair Trading is
unlikely to provide rigorous scrutiny of debt management companies for years.

The government gave its competition watchdog new powers earlier this year to
resolve fears of mis-selling to struggling debtors, who account for a sizeable
chunk of the trillion-pound consumer debt mountain.

Debt management companies have been accused of providing poor advice to
debt-ridden consumers, including pushing individual voluntary arrangements where
bankruptcy would be a better option.

But IPA chief executive Nick Sabin told Accountancy Age it could
take as long as four years for the OFT to check up on the quarter of a million
new licences that it will be handing out from 2008 following a change in its
powers under the Consumer Credit Act 2006.

‘The OFT will have powers to license and discipline, so the government has
said it has dealt with it,’ said Sabin. ‘But how quickly can the OFT do it? It’s
a big process to go through.’

IPA proposals to regulate debt management companies have been dismissed by
the government, which believes the OFT will be able to regulate the industry

‘We have lobbied government but have completed that stage as far as we’re
concerned,’ said Sabin.

The IPA is now talking with the Money Advice Trust and others to establish
best practice advice guidelines for anyone advising debtors. The advice could be
aimed at public and voluntary bodies such as the Citizens Advice Bureau, as well
as the debt management industry.

Another IPA plan is for an accreditation scheme for consistent and timely
best advice, impartial advice, training for staff and corporate governance
within the debt management industry. But discussions about who would operate the
accreditation have not yet begun.

A spokesman for the OFT said it expected the transition to go smoothly, as it
would be a similar process to that which already existed.

Related reading