Tuesday, August 26, 2014

The Insolvency Services’ Report on the first year of the Complaints Gateway – some comments

Last Friday The Insolvency Service released its report on the first year of operation of the Complaints Gateway, which covers the year ended 5 June 2014. It was a wet Bank Holiday weekend, so for me it was a choice between decorating or reading the report and doing other work. In the end the decorating won out, but I still had time to read the report as it was marginally more interesting that watching paint dry. Below are some observations on the report, but if you want to read it in its entirety then you can access it by clicking here.

First, the foreword by Dr Richard Judge highlights that “the Gateway received over 900 in the first 12 months - almost 200 more than [those received direct by the RPBs] in 2012/2013 – a good indication that it is meeting the aim of making the complaints process easier to understand and use.” I am not sure about that conclusion given that the Insolvency Service’s own review of regulation shows that there was a 29% rise in complaints from 578 in 2012 to 748 in 2013 such that the increase to 941 for the first year of the Gateway is just continuing that upward trend in complaints. To my mind it just reflects that people as a whole are now more ready to complain than they have been in the past. Added to which, if you look at the breakdown of the complaints to the Gateway you find that 69 complaints were made in respect of the same case. That smacks of an organised campaign by say a Trade Union, trade body or other pressure group. Treat that as one complaint about one case then the effective number of complaints is reduced to 873, which is an increase of only 125, or 17%, a far smaller increase than that seen in the previous year. In short, I think that it is too early to draw any firm conclusions about the effectiveness of the Gateway in making the complaints process easier to understand and use.

At present it is also too early to determine whether the RPBs are having regard to the common sanctions guidance when determining the appropriate sanction to apply when a complaint is found proved. The system of common sanctions guidance was introduced at the same time as the Gateway, but at present only three of the complaints made via the Gateway that have progressed through the RPBs disciplinary procedures have resulted in a proven complaint and disciplinary sanctions being imposed. That is something that next year’s report should provide more information about. If you want to find out more about the common sanctions guidance click here.

So what does the report actually tell us about the complaints received via the Gateway? And what lessons can be learned from the report with a view to trying to avoid complaints?

- 190 out of the 699 complaints referred to the RPBs were closed by the RPB at the assessment stage, i.e. the stage at which the RPB determines whether or not the complaint made gives rise to a case to answer, and whether this has been properly evidenced, before the complaint proceeds for formal investigation. This shows that the RPBs will still actively filter “complaints” received before formally investigating them.

- For a number of years the ICAEW have operated a formal conciliation process in an attempt to reach an agreement between the complainant and the IP without using formal disciplinary procedures. The Insolvency Service have now had “discussions” with the ICAEW such that even where a complaint has been resolved through conciliation the ICAEW will still treat any regulatory breaches as a complaint. Conciliation works well for the complainant as they get a positive resolution of their issue rather than the IP just being disciplined and potentially not dealing with the underlying issue. It will be interesting to see if the change in approach results is any reduction in the number of cases resolved via conciliation as effectively the incentive for the IP in agreeing to conciliation has been removed.

- There is an analysis of complaints referred to the RPBs by subject matter, although unfortunately it does not indicate into which category the 69 complaints about one case fell so that we cannot tell which of the subject matters for complaint were skewed by those complaints. The analysis does show that 51% of all complaints falling into 3 of the 12 categories into which the complaints referred were analysed. The top 3 are communication breakdown/failure; Voluntary Arrangements; and SIP 2.

- Communication breakdown/failure is the largest category into which complaints fall and it reinforces the need to explain clearly to creditors what is happening in the case, both in reports and in any one to one correspondence with an interested party. Whilst there will always come a time when you have to say in correspondence with an interested party that enough is enough and that you will not enter into further dialogue with them, that should be used as a last resort. In order to try and minimise the risk of a complaint being made, and the resultant irrecoverable time and expense that it leads to, then try and be open and helpful in correspondence with interested parties, rather than defensive and obstructive.

- Complaints in respect of Voluntary Arrangements is a theme throughout the report, with IVAs representing the largest single case type (32%) in respect of which complaints were referred to the RPBs. The report indicates that a “high proportion” of such complaints relate to delays in closing the IVA after receiving the debtor’s final contribution, and that this is principally as a result of the IP still trying to claim PPI refunds on behalf of the debtor. As a result of this, the ICAEW and IPA have agreed to take forward all cases for investigation where the delay in closing the IVA exceeds 6 months from the debtor’s final payment. Whilst the report only indicates that this action is being taken by the ICAEW and IPA, the RPBs that are handling the vast majority of such complaints, I think that it is safe to say that the other RPBs will also take a similar approach. I can also envisage that the monitors will be looking at this as a specific issue during monitoring visits. We had thought that the potential for PPI refunds would now be reducing given the amount of publicity given to the issue, and the number of claims firms in the market, but it is clear from speaking to IVA specialists that they still need to be considered in IVAs that are being approved at present. In order to help avoid problems and delays, then try and identify PPI refunds at the commencement of an IVA and then progress them without delay.

- Breach of ethical guidelines is fourth in the list representing 13% of complaints. The report then analyses those complaints in more detail and it becomes clear that 42% of those complaints relates to a “conflict of interest” and 36% to professional competence and due care. Professional competence and due care is, to my mind, a catch all category that can be used for any breach of the legislation, SIPs or professional standards where there is no other specific category of complaint into which it can be analysed, and it would merit further analysis in order to give IPs some idea as to where problems are being seen. The high number of complaints about “conflict of interest” is interesting and it reinforces the need for IPs to identify, evaluate and then deal with threats and perceived threats to the fundamental principles pre-appointment. We suspect that if the threats had been fully disclosed at the time of appointment, less complaints would have arisen and in those that did arise the IP would have a stronger defence that he took reasonable steps to deal with them.

- Finally, which regulator has had the most complaints referred to it? Out of 699 complaints referred to the RPBs the bulk were in respect of IPA licensed IPs 288 (41%) and ICAEW licensed IPs 285 (41 %), which is unsurprising since they are the largest regulators. The figure for the ICAEW was skewed by the 69 complaints in respect of the same case, so treating that as one effective complaint then the figures become 288 (46%) and 217 (34%) respectively. Out of interest, and after adjusting for the 69 complaints in respect of one case and treating it as one effective complaint, I have also analysed the complaints referred to the RPBs and expressed them in the table below as the number of complaints made per IP regulated by each RPB:

Name of RPB
No. of IPs licensed as at 1 January 2014
No. of complaints referred
No. of complaints referred per IP licensed

I will leave you to draw your own conclusions regarding this analysis.