Complaints Handling in the UK Insolvency Practitioner Profession

Abstract

Since the mid-1980s it has been a requirement of UK law that any person who acts as a bankruptcy trustee or as a liquidator of an insolvent corporation must be a licensed insolvency practitioner. In 2007 there were around 1,700 practitioners licensed to practice by eight different regulators. Complaints about the conduct of insolvency practitioners may arise in a wide variety of contexts. Moreover, as insolvency processes affect a range of stakeholders, including debtors, creditors and the wider public, complaints may derive from several possible sources. In recent years, public concern has been expressed about issues such as the level of practitioner remuneration, pre-packaged asset sales, retail insolvencies and the provision of appropriate advice to consumer debtors. In the light of these concerns, and given also the increasing volume of individual insolvencies in the UK driven by consumer debt, there is every reason to suppose that complaints against insolvency practitioners (whether well-founded or not) will continue to rise.

This study, which was commissioned and funded by the UK Insolvency Practices Council, is the first to consider how complaints about insolvency practitioners are handled both within insolvency practitioner firms and by the various regulators. Drawing on a series of semi-structured interviews with insolvency practitioners, senior compliance officers and officials, we provide a comprehensive account of the functioning of complaints handling processes within the UK insolvency profession and a case study in the workings of professional self-regulation. Our principal finding is that firms' in-house complaints handling procedures are generally conceived of as tools for the centralized management of risk rather than as alternative systems of dispute resolution and redress, although there is evidence of an increasing emphasis on customer care and redress within those firms that concentrate on volume provision of debt relief services to consumer debtors. Within the regulators, we find, perhaps not unsurprisingly, a clear bias towards discipline and sanction rather than complainant redress.

Keywords: bankruptcy, insolvency practitioner, regulation, self-regulation, consumer bankruptcy, consumer debt, complaints handling, alternative dispute resolution

JEL Classification: K22, K23, K29, K35, K40