UK Debt Management Firms to Feel the Pressure of Increased Regulation

by Mike Bevel, CollectionIndustry.com

Things just got a little less jolly for English credit counseling firms: stiff new regulations levied by the Insolvency Practitioners Association ? an association primarily made up of large banks ? have called for more training and qualifications.

What prompted these regulations is the U.K. practice of Individual Voluntary Arrangements, which allows debtors to repackage their loans rather than enter into bankruptcy. It?s similar to what credit counselors in the United States do; and, much like the U.S., the U.K. is cracking down on potentially fraudulent credit counselors who are in it only for the dough, and not so much for the benefit of consumers.

Banks in the U.K. have adopted this seemingly hostile approach to the Individual Voluntary Arrangement system, claiming it allows people to wriggle out of their obligations while at the same time triggering a huge rise in their bad debt provisions. The prospect of adhering to these new regulations, though, is not popular with British credit counselors.

Martin Cross at broker Altium told CityWire UK that the market reaction reflects “the political maneuvering by the banks to deflect the blame for consumer over-indebtedness from themselves on to the IVA and debt management companies ? which is rather like blaming plumbers for water leaks.”