We have recently heard that there is a growing trend with certain creditors to submit proofs of debt and proxies for decisions, but in a password-protected format, requiring the IP to telephone to obtain the password. That is a pretty silly way to work for a number of reasons, so we have put this article on our Blog and we will refer to it on LinkedIn and X (formerly Twitter), in the hope that the numpties who thought it was a good idea will reconsider or find an alternative that does not have the potential to increase costs exponentially across the whole insolvency profession.
For a start, it simply is not necessary. The justification being used is “Data Protection” or “GDPR”, but that just does not apply here. The debtor, whether corporate or personal, is insolvent and their details are available on Companies House or the Individual Insolvency Register. The claimant/creditor will generally be a company, or at least the ones that are currently using password protected proofs of debt are companies. Therefore, the only personal data on the form either relates to the insolvency proceedings and is being submitted under a statutory requirement, so is outside the scope of GDPR, or it is the signature and name of the creditor’s agent. If the person signing multiple thousands of proofs of debt, electronically, on behalf of a range of corporate creditor clients, feels unable to consent to their name being shared with insolvency professional firms, then maybe they need to find a new role.
Second, if the individual that is signing the proof of debt form is concerned about their personal data, or the agent wants to attach documentation that may include personal data and is unable to get consent from the individuals at their client that may be affected, there has to be a better way than requiring an IP to phone and ask for it every time. Just this week we heard of a case where the creditor failed to answer after 10 minutes. That may not sound like much in one case, but some of these creditor agents submit thousands of proofs of debt per week. The costs of every IP making thousands of unanswered calls and then following up to finally obtain a password will run into millions of pounds. Given the nature of insolvency, a large amount of that money will not be recovered by the IP and, if it is, the creditors will suffer.
We think that there needs to be some debate across the profession. As yet, I am afraid that we don’t have the answers, but these are some of the questions that we think could be relevant:
1) Is there a real need to password proofs of debt at all?
2) Can an IP treat a proof of debt as undelivered if it is password protected?
3) If the answer to 1) is yes, and the answer to 2) is no, is there a cost-effective alternative?
4) Is there a way that proofs of debt and proxies can be submitted without the sort of data that would necessitate password protection?
One idea that might work would be to have one password for each IP firm, so that the claimant creditor can use it whenever they submit a proof to that firm. Alternatively, could passwords be delivered automatically using a text message or WhatsApp message, so that the IP does not have to phone the creditor?
We are not convinced that passwords are needed at all, but if they are required, someone needs to find a solution that won’t just increase costs. Of course, it would have been nice if they had thought about it first, rather than issuing password protected proofs and assuming that the additional work and cost would be somebody else’s problem.
On that happy note, have a lovely weekend!
