Small Business, Enterprise and Employment Bill

Baroness Hayter of Kentish Town Excerpts

Wednesday 21st January 2015 Grand Committee

Moved by

[Baroness Hayter of Kentish Town]

61AF: After Clause 141, insert the following new Clause—
“Power to license an approved redress scheme for complaints
(1) The Secretary of State must make provision requiring all regulated persons to be members of an approved redress scheme for dealing with complaints from debtors received in connection with insolvency practitioners.
(2) The Secretary of State may approve a redress scheme to adjudicate on complaints from debtors about insolvency practitioners.
(3) The Secretary of State may by regulation require all insolvency practitioners to be members of such a scheme.
(4) The regulations may require insolvency practitioners to adopt their own complaint handling procedures, with debtor complainants only able to refer their complaint to the redress scheme once the usual procedures are exhausted.
(5) A “redress scheme” is a scheme which provides for complaints against members of the scheme to be investigated and determined by an independent person.”

[Baroness Hayter of Kentish Town (Lab)]

My Lords, this amendment stands in my name and that of my noble friend Lord Stevenson. I welcome the provision in the Bill which would empower the Secretary of State to designate a single regulator for all insolvency practitioners in place of the current seven regulators. It can only be in the interests of practitioners to have a single system for authorisation, technical standards, training, codes of ethics and conduct, discipline and other matters. It will also be in the interests of consumers as there would be a single standard of practice and, if my amendment is agreed, a single system of handling service complaints from debtors.

At the moment, there is no proper system for dealing with service complaints. Any that are made are handled broadly as disciplinary matters against the practitioner, which may well not be appropriate where there has just been a bit of poor practice, some delay, a lack of communication or similar. Furthermore, there is no system of redress should such a complaint be found to be justified, as the disciplinary committee will be concentrating more on the fitness to practise of the practitioner than on righting any wrongs caused by the inadequate work.

As the Minister knows, the EU directive on ADR requires that there should be an appropriate redress scheme in place for every industry and service. That might cover this issue but, due to legal uncertainty about whether the debtor in this case could be considered a consumer under the directive, it would be good to ensure that any such person can have their complaint heard and considered once it has gone to the practitioner in the first instance.

When I was involved in trying to set up such a system when I was on the Insolvency Practices Council, the challenge was made rather greater by the fact that there were seven different regulators. Given that the Bill enables, albeit perhaps well in the future, a single regulator to be designated, this would be an excellent moment to develop and licence a single ADR scheme, which would be independent of the disciplinary process handled by the new regulator. There is an obvious precedent in legal services, where service complaints had been handled by the various regulators, such as the Bar Council, the Law Society, the Council for Licensed Conveyancers and two others dealing with notaries, I think, and patent lawyers. Once the Legal Services Board was set up to oversee those front-line regulators, the new Legal Services Ombudsman was established to adjudicate on complaints from clients.

In the case of insolvency practitioners, Clause 141(3)(g) allows complaints to be investigated. However, it is unclear whether this would be done in the form of a disciplinary route so that complaints would lead to disciplinary action being taken by the regulator—which of course is completely right and proper. Alternatively, more in the area which I am looking at, of service complaints, the individual will be looking for redress and not for discipline to be taken against the practitioner.

I do not envisage the creation of a new ombudsman, given that perhaps we have too many of them already, but also given the very small number of practitioners and therefore the even smaller number of complaints. However, it would be possible for an existing ADR scheme, which could be the legal ombudsman, to handle these rather than—as we have now done thanks to this House—enabling the legal ombudsman to do that, meaning that they can now take complaints against CMCs. Alternatively, it could be done by the residual ADR scheme which is being set up under the auspices of BIS, thanks to the EU directive.

It is important for there to be a single system of such complaints, given that there will be very few of them. In addition, it might come under the auspices of the new regulator, but it should be independent of it. Handling complaints is very different from being a regulator. As I said, much as I welcome what is in the Bill, it is important that the two are different, as we have seen in various other professions.

Before I move the amendment, I note in passing that there are 2,000 or fewer practitioners who are about to face a complication in their regulation thanks to this very same Government’s rather mad idea of creating two new categories of insolvency practitioner. I note that that is not being handled by the Minister, but it is happening elsewhere in the same Government. At present there is just one type of insolvency practitioner, albeit regulated by seven different bodies. That regulation comes from the fact that insolvency practitioners as individuals emerge out of different professions. Some of them have been lawyers, some accountants, while others have gone straight into being insolvency practitioners, which explains the seven different regulators.

What we now face under the Deregulation Bill—although in this sense it is a regulation Bill—is a different way of cutting and chopping the profession. Instead of having different regulators because of the original profession, the proposal is that we will now have three sorts of insolvency practitioner: those who do only individual insolvencies, those who do corporate insolvencies, and those who do both corporate and individual insolvencies. We will have another split in the profession, albeit done by the type of debtor this time rather than the type of practitioner. I do not expect the Minister to be able to solve that today, but it is slightly nonsensical.

On the main issue, the intention here is to try to tease out the difference of having complaints handled such that the process is independent from the regulator, albeit the ombudsman could come under the auspices of the regulator, as is the case for the Legal Services Board. However, it is very important that any decisions are independent of the regulator and are taken via an independent process. I beg to move.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Baroness, Lady Hayter, for Amendment 61AF, which proposes an approved redress scheme for debtor complaints about insolvency practitioners. This is an important issue and I am grateful to the noble Baroness for bringing her great expertise on redress to our Committee.

At present, all insolvency practitioners and/or their firms must have a complaints process which debtors and others impacted by their actions are free to access. If the debtor is not satisfied with the response, they can make a complaint to the complaints gateway, which is hosted by the Insolvency Service. All complaints referred to the gateway are reviewed by the Insolvency Service before being sent to the appropriate regulatory body for consideration.

A review of the gateway last summer found that this system works well, and the increased number of complaints suggests that access for complainants has improved. Information captured via the gateway—which is, if you like, a single point of contact for consumers and debtors—enables the Insolvency Service to monitor how complaints are dealt with by regulators.

I note what the noble Baroness said about the ADR directive. Although that is not for this Bill, I will look at how it fits in and the impact of changes to the insolvency practitioners’ profession that she mentioned. I would always share her wish that people understand the system.

Turning to the issue of the single regulator, the measures in the Bill aim to strengthen the current regulatory regime for insolvency practitioners by building trust and confidence without the need for further intervention. However, if that is not the case and self-regulation in this industry does not work as we hope, this would be the point to consider using the power to introduce a single regulator. I agree with the noble Baroness that were that the case, the complaints system, including arrangements for redress, is one of the things that would need to be considered at that time. However, given that we already have a bespoke system for dealing with complaints about insolvency practitioners under the existing system, I hope the noble Baroness would agree that the introduction of an additional scheme such as the one proposed is not necessary at this time. I hope that the noble Baroness has found my explanation helpful and will agree to withdraw her amendment today.

[Baroness Hayter of Kentish Town]

I thank the Minister for that. I agree with what she said about the complaints gateway. If we could do that for all the other ombudsmen, that would be wonderful. I know that under the other bit of the department attempts are being made to move in that direction. The idea that any consumer would have a single point of entry is excellent.

I am not proposing an additional scheme here. Really, my point is that when we have a single regulator it should be borne in mind that complaints that seek redress are different from those that lead to disciplinary action. I am just flagging that up. I hope at the point that this was to be implemented at some date in future that the need to make the redress part of the ombudsman environment, not simply under the regulator, is what is best. This is very close to that and I certainly do not want to set up any new additional bodies. I hope that those thoughts might be taken into account. With that comment, I beg leave to withdraw the amendment.

Amendment 61AF withdrawn.