New rules require insolvency fees to be shown upfront

Today the government announced new rules designed to end the uncertainty of unlimited hourly charges for creditors.

Announced by Business Minister Jo Swinson, the new rules will require insolvency practitioners to ‘provide a summary of estimated costs, the work to be undertaken and, where an hourly rate is proposed, an estimate of the expected time.’

These estimates ‘will act as a cap on fees as, once agreed, they can only be changed by agreement between the insolvency practitioners and those that are owed money.’

Swinson said:

“Increased transparency is a sensible and practical way to strengthen the hands of those owed money in an insolvency and will give insolvency practitioners the opportunity to demonstrate how their services provide value for money.”

Giles Frampton, president of the insolvency trade body R3, comments:

“We are very pleased with the government’s practical proposals for updating the insolvency fees-setting process.

“An upfront estimate should work for both creditors and the insolvency profession, and will help improve trust and transparency in our insolvency regime.”

Philip King, Chief Executive of the Chartered Institute of Credit Management (CICM), said:

“The CICM has been vocal in wanting to see upfront estimates for work undertaken so the element of surprise is removed further down the road in the insolvency procedure.

“The introduction of new rules is therefore to be strongly welcomed as are any well-considered actions that help to bring greater confidence to creditors and transparency in the fees that are charged.”

These new insolvency rules will come into force in October 2015.

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