I am an insolvency practitioner, what should I do?

From 1 April 2014 an Insolvency Practitioner will have an insolvency exclusion which means that any activity within the exclusion is not considered a credit-related regulated activity. Chartered Accountants Ireland, ICAEW and ICAS have been liaising with HM Treasury as to how this exclusion is to be interpreted. This is explained in more detail below.

Insolvency Practitioner Exclusion

What is covered by the exclusion?

From 1 April 2014, an insolvency practitioner, whilst acting as an insolvency practitioner is excluded in respect of the activities of:

• debt adjusting;
• debt counselling;
• debt collecting;
• debt administration; and
• providing credit information services.

Also where an insolvency practitioner is acting in “reasonable contemplation of appointment” the following activities are excluded:

• debt adjusting;
• debt counselling; and
• providing credit information services

The exclusions also apply to those working for the insolvency practitioner.

What is not covered by the exclusion? Debt Management Plans & non-statutory debt solutions (i.e. work outside S 388 Insolvency Act 1986)

For any debt work outside the definition of Section 388 the exclusion does not apply. HM Treasury and the FCA have now indicated that they view, for example, Debt Management Plans, and other non-statutory debt solutions, as outside the exclusion.

Whilst the FCA and HMT have not issued guidance on this, our current understanding is that it is reasonable for an IP (or their staff) to consider initial debt advice/fact finding as ‘in reasonable contemplation’ of an insolvency appointment but IPs cannot take advantage of the exclusion after the point when, for example, a Debt Management Plan or other nonstatutory debt solution, has been identified as the prospective solution for a debtor. At that point, the situation becomes more complicated, as the solution is not an insolvency appointment but a credit-related regulated activity to which the exclusion does not apply.

FCA Regime

If you have identified that your firm requires a consumer credit licence with the FCA you should apply to the Office of Fair Trading (the OFT) immediately to get a full OFT licence as only OFT licence holders at 1 April 2014 will be transferred across to the FCA under the ‘interim permission’ regime. Firms with interim permissions will subsequently be considered for full authorisation by the FCA in due course between 1 October 2014 and 1 April 2016 and there will be phased applications.

If you are already within a firm which holds a standard credit licence from the OFT then you should ensure that the firm has entered into the FCA interim permission regime.