Advice NI Response to Insolvency Service Consultation
Advice NI welcomes the opportunity to respond to the Insolvency Service proposed legislation amendment to address the problem that allowing undischarged bankrupts to operate accounts could potentially expose banks to claims by trustees in bankruptcy. Section 1 includes background information on Advice NI and a general overview. Section 2 then highlights our response to the consultation.
Section 1: Background & Overview
Advice NI is a membership organisation which exists to provide leadership, representation and support for independent advice organisations to facilitate the delivery of high quality, sustainable advice services. Advice NI provides its members with the capacity and tools to ensure the delivery of effective advice services. This includes: advice and information management systems, funding and planning, quality assurance support, NVQs in advice and guidance, social policy co-ordination and ICT development. Membership of Advice NI is normally for organisations that provide significant advice and information services to the public. Advice NI has 68 member organisations operating throughout Northern Ireland, providing information and advocacy services to approximately 150,000 people each year and dealing with over 272,000 enquiries on an extensive range of matters including: debt, social security, housing, consumers and employment issues. We also deliver advice services directly (face to face, helpline, text and online) including HMRC Tax and Benefits Project, Beat the Recession project (a partnership across the advice sector in NI) and Debt Action NI.
Presently Advice NI manages the Department of Enterprise Trade and Investment’s money and debt advice programme. Debt Action NI has been operating since 2009. Since then the project has helped nearly 13,000 people deal with almost £215 million in debt. Over 7,500 of these clients and nearly £114.5 million of debt were dealt with by the new integrated Debt Action NI service which has been operating across NI since August 2012. The new service offers a number of access points and integrates telephone, face to face and web based advice services. Our professionally trained money and debt advisers provide holistic advice and options to our clients. Since August 2012 we have advised 237 clients on bankruptcy. For further information, please visit www.adviceni.net or www.debtaction-ni.net
Advice NI is committed to quality standards internally and across our membership.
Advice NI has Investors in People (IiP) silver status. Our physical building and network infrastructure which hosts the Advice Pro case-recording system complies with Information Security Code ISO 27001.
Also, we are a
- Member of the Money Advice Trust Partnership
- Member of the Institute of Money Advisers (IMA)
- DRO Competent Authority
- a holder of the OFT Consumer Credit License
Section 2: Response to Consultation
Advice NI is in favour of the new proposed changes that intend to increase access and availability of bank accounts to undischarged bankrupts. We welcome this proposed change in legislation and firmly believe without it, the people of Northern Ireland would be disadvantaged compared to our counterparts in England and Wales. Doing nothing would mean the threat will remain of a potential retrospective claim from a trustee. We believe the more work undertaken to remove such barriers is positive for the customer, society and the economy. According to government statistics, only 87% of households in Northern Ireland access bank accounts. This is the lowest percentage across the UK. The only bank currently offering a basic bank account to bankrupts in Northern Ireland is Barclays. Barclays have 9 branches in Northern Ireland located in 8 council areas – Belfast (X2), Ards, Bangor, Lisburn, Ballymena, Portadown, Newry and L/Derry. This limits access to over two thirds of people living in Northern Ireland with many having to travel several miles to a branch in order to open an account. According to the Department of Enterprise, Trade and Investment, 45% of the population live in rural areas and access to public transport may be limited. Advice NI does recognise that once this barrier is overcome a person can use the post office to access their money. However, the lack of access and choice of basic account providers is disadvantageous to the vast majority living in Northern Ireland. In 2012, the Organisation for Economic Cooperation and Development’s (OECD) International Survey of Adult Skills (ISAS) for Northern Ireland indicated 18% of adults had low levels of literacy skills. This only compounds the issue of trying to access online information and application forms.
The NI Executive is in the process of developing a Financial Capability strategy which strives to educate people about money and financial products. However, it has been recently highlighted by the Financial Capability Partnership that there is an overwhelming need for a financial inclusion strategy. The practice of banks not allowing bankrupts access to a basic account is further excluding them financially. Therefore, this activity is in stark contrast to any government inclusion and capability policies. Government should directly challenge this banking behaviour and Advice NI recognises this proposed change to limit any retrospect claim by a Trustee as a positive first step. Government should work closely with the banking sector to ensure access is allowed and people are not being disadvantaged. Not having access to such accounts means a bankrupt cannot avail of the advantages of accessing a bank account, such as getting payments directly paid into an account instead of cash in hand. For some this is harder to manage and may not promote good financial practice such as saving and budgeting. The lack of access to bank accounts only hinders bankrupts further by excluding them from discounts afforded to those using direct debits and not allowing them to earn interest on their money.
Under the consultation document it states in Annex 3, “The Official Receiver routinely notifies the main banks in Northern Ireland each time a Bankruptcy Order is made and it is normal practice for banks to close bankrupts’ existing accounts. Bankrupts can encounter problems trying to open even a basic bank account with another bank. This can lead to them having problems receiving income and lead to them to become financially excluded.” Advice NI would ask government to consider banning this practice. Instead the bankrupt’s current bank should automatically offer to transfer them to a basic bank account. At the very least the current bank should offer the bankrupt detailed information of all relevant basic bank account providers and how to access these.
We understand that the Insolvency Service does not intend to monitor the implementation of the impact of this legislation and that it is optional for banks to comply. We would ask that Insolvency Service at least provide updates on NI Direct and/or other relevant websites of banks that are willing to provide undischarged bankrupts with basic bank accounts.
With regards to costs, there would be a cost to Advice NI to update all bankruptcy related information materials for example factsheets, websites etc.
The consultation document states that “it is standard practice to keep insolvency legislation in Northern Ireland as far as possible in line with that applying in England and Wales.” However, there appears to be a discrepancy between England and Wales compared to NI in relation to the publication of bankrupt’s details. Advice NI believes the Insolvency Service need to review their current position on publishing bankrupts’ details in the Belfast Telegraph. Many of our clients are often extremely distressed by the bankruptcy process and many have reported to our advisers that having gone through it, their ultimate shame and disgrace, is to have their names and addresses published in the Belfast Telegraph. We are seeing many people who have ended up bankrupt through factors often not of their own doing but rather because of the impact of recession, job losses and marital breakdown etc. We believe that it is overly punitive and humiliating to the individuals concerned to publish their details in a newspaper with as wide a circulation as the Belfast Telegraph. Advice NI has considered the relevant legislation and believes that it is not a requirement of the act to do so.
The relevant section 6.043 (2) (iii) — Action to follow making of order refers: ‘cause the order to be advertised in such newspaper as he thinks fit" which means a bankrupt appears in the Belfast Telegraph because the Official Receiver thinks it is fit that it should be so. Given the impact of this on the people concerned, we would ask that serious consideration to ending the practice of advertising in the Belfast Telegraph and investigate other methods of publishing this information.
Advice NI believes that the fees for bankruptcy are too expensive. This is a huge hurdle for someone already facing financial ruin as many do not have access to such funds. Our Debt Action NI advisers actively research other sources of help to try and access grants to pay for bankruptcy. Since August 2012, we have 214 clients trying to save this fee. Our clients often tell us that once they have saved some money it normally has to go on emergencies as and when they occur. Therefore they are finding it almost impossible to find any resolution to their situation. In our experience, creditors are reluctant to make clients bankrupts. Since August 2012 we have only had five creditor petitions. This only prolongs the situation and clients continue to experience undue distress and hardship.
Contact information on this consultation response:
Bob Stronge (Chief Executive)
Sinead Campbell (Head of Money and Debt Services)
1 Rushfield Avenue
Tel: 028 9064 5919
Fax: 028 9049 231