The move follows the 2013 Kempson review and consultation on setting fees in the light of public concern about how the current system could be exploited by unscrupulous insolvency practitioners to charge excessive fees to the detriment of creditors.
The new rules will require practitioners to provide a summary of estimated costs, the work to be undertaken and, where an hourly rate is proposed, an estimate of the expected time.
The estimates will act as a cap on fees: if they need to be changed, the practitioners will have to negotiate the difference with those who are owed money.
Business minister Jo Swinson said, “Increased transparency is a sensible and practical way to strengthen the hands of those owed money in an insolvency and will give insolvency practitioners the opportunity to demonstrate how their services provide value for money.”
Welcoming the change, Giles Frampton, president of R3, the insolvency trade body, said that it would help to improve trust and transparency in the insolvency regime. “The profession first supported an upfront estimate system in 2011 and we are pleased to see it set to become reality.”
R3 has also launched a website, www.creditorinsolvencyguide.co.uk, which has been designed to guide creditors through the insolvency process.
The website, which is also supported by the Chartered Institute of Credit Management and the British Property Federation, explains the different insolvency processes and shows how creditors can get involved and increase the chances of seeing money returned to them.