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The designation Personal Insolvency Practitioner (PIP) is not something earned easily or taken on lightly. Individuals seeking the honour must complete a rigorous, formal education, testing exams, to say nothing of fitness and probity examinations, strict systems and compliance obligations and not insubstantial fees to boot: all of this in pursuit of a living that to date has proved something less than lucrative.
But that is to focus unduly on the monetary rewards aspect of the profession. In fact, the most vocal grievance currently being articulated by PIPs is the fact that their actual description – Personal Insolvency Practitioner – is something of a misnomer. As one disgruntled PIP wryly puts it, the designation should be “P-PIP” – Partial Personal Insolvency Practitioner.
The reason for this is that in fact when it comes to actually working with the over indebted, the hands of the PIP are often so tied as to be useless. The principal cause of this state of affairs is the new Central Bank rules on debt management services that came into effect in October of last year.
Anecdotal evidence from PIPs suggest that a majority of individuals approaching PIPs for their services simply do not qualify for any of the three schemes of arrangement on offer. The chronic personal debt difficulties afflicting the country range well beyond those mired in negative equity. That being the case, PIPs are precluded from offering debt management advice unless they have applied to the Central Bank for authorization.
And the application and requirements to be authorized as a debt management firm is, in the words of one applicant, “a nightmare”. This does not seem to be much of an exaggeration given the published requirements as found in the Authorisation Requirements and Standards for Debt Management Firms (2013).
Providing debt management services without authorisation is a criminal offence – even if you have gone to the lengths of qualifying as a PIP. One might have thought that this sanction is related to stewardship of client funds, but in fact even authorized debt management firms are not allowed to handle client funds.
This is just one of a number of justifiable grievance held by PIPs in relation to the current pedestrian pace of arrangements for the formal debt relief schemes.
Later this week the Director of the Insolvency Service of Ireland, Lorcan O’Connor, is due to face the Oireachtas Joint Committee on Finance, Public Expenditure and Reform. Mr O’Connor would, on the face of things, seem set for a rough time – possibly unfairly. This week the ISI will publish the number of insolvency deals struck in the first quarter of 2014 and it is widely expected that this will be minimal. It is understood that to date less than 100 protective certificates have been issued to date (these certificates are issued by the courts that protect applicants from legal proceedings by creditors while applying for a DSA or PIA).
One defence of the extraordinarily slow level of activity on the formal side of things has been the fact that a greater number of informal deals have been struck. It is contended that this would not have been the case were it not for the existence of the formal schemes. This is probably true, but the widely publicised disclosure last week that AIB had made 100 deals with overindebted borrowers should be recognised for what it is – a drop in the ocean.
Later this month the Central Bank will publish details of its pilot scheme for resolution of multi-banked over indebted. Should this prove to have been a positive experience this will likely become another alternative to the formal, PIP-facilitated schemes.
Of course, the remit of the Finance Committee’s hearings this week extend far beyond the activities of the ISI: the Committee will also hear from the Irish Mortgage Holders Organisation, MABS, New Beginning, FLAC and the Phoenix Project, with a view to forming a holistic view on the overall mortgage arrears and resolution process.
Without wishing to pre-empt the proceedings, it seems likely that the members of the Finance Committee will in the first instance be somewhat astonished that progress on the formal side has been so slow. While greater activity on the informal side is to be welcomed, it will be interesting to see whether they form a view that this is down to a desire to clean up the system or whether this is more motivated by frustration at the formal system.
It seems unlikely that the current level of activity through the ISI, given the time and expense devoted to setting up that body and the involvement of the troika, will pass without rigourous scrutiny. Questions will surely be asked about the public visibility of the schemes. But perhaps most pertinently of all, the artificial demarcation of the authorized “debt manager” and the Personal Insolvency Practitioner will be brought into the light. As things stand, this is a sad waste of highly qualified individuals with much to contribute to the national personal debt issue. If the Committee agrees with this view, it may be the beginning of the end of the age of the P-PIP.