OFT launches market study into corporate insolvency

The OFT has announced today that it is to look into the corporate insolvency market.

The study will look at the structure of the market, the appointment process for insolvency practitioners and any features in the market which could result in harm, such as higher fees or lower recovery rates for certain groups of creditors. There's a Q and A about the study on the OFT's website .

Are you surprised by this interest, or is it another example of insolvency being under the spotlight. The OFT are looking for comment (though on what exactly is as yet not clear) - you may want to make your views known.
  • I think this is a further reflection of the publicity recently attracted to Insolvency.

    Unfortunately the "something must be done" brigade often cause more problems than they solve.

    Personally I have long beleived the value for money  & fees debate has been supressed, but Im sure the OFT will only be looking at the "high profile" "big firms" when the abuses are at a much lower level.

  • An extract:

    "What are the possible outcomes of the study?

    Market studies involve an analysis of a particular market with the aim of identifying and addressing any aspects of market failure from competition issues to consumer detriment and the effect of government regulations. Possible results of market studies include:

    • enforcement action by the OFT
    • a reference of the market to the Competition Commission
    • recommendations for changes in laws and regulations
    • recommendations to regulators, self-regulatory bodies and others to consider changes to their rules
    • encouraging firms to take voluntary action
    • campaigns to promote consumer education and awareness
    • or even 'a clean bill of health' for the industry."

     

    Am I the only one a tad concerned that finding nothing wrongt with us is relegated to an 'or even'.  Nice to see there's no prejudging!

  • If you would like to have a look at the World Bank report quoted by the OFT - it's available here. There's also an very interesting spreadsheet of the various rankings by country. The UK is 5th out of 183 on the overall "ease of doing business" indicator.
  • To quote Stauart (13 November), "Im sure the OFT will only be looking at the "high profile" "big firms" when the abuses are at a much lower level". 

    I think the OFT are likely to focus on the big firms, as that is where the high profile cases and headline fees go.  However, the following two points spring immediately to mind:

    1) What evidence is there that the abuses are at a much lower level in large firms?  From our reviews around the country to practitioners in many different size firms, the potential for abuse arises in large as well as small, but it is usually appropriately dealt with.  I'm not saying that large firms are better or worse, simply that from our experience there is not much to choose between them and the smaller firms.  The main difference is that in a larger firm there is a greater likelyhood of a lot of small time abuses being overlooked, while in a smaller firm there may be more opportunity for the time on a case to be manipulated.  In reality, what we generally see is properly charged time being correctly accounted for in line with creditor approval and the IP capping his costs where appropriate to the case.  In many more cases we see the IP writing off time because there are insufficint realisations for him to be paid the money he has earned.  But then, we only work for the good guys!

    2) The elephant in the room for the big firms with the OFT having a look must surely be the operation of bank panels...