Ending the public insolvency register: how would it work?

In case you missed it: last month we shared our call to end the practice of shaming people who get help with their debts by publishing their details online. Today we’re going to take a closer look at how abolishing the public insolvency register might work.

Why abolish the public register?

First, a reminder of the situation as it stands. When you begin an insolvency solution – bankruptcy, an IVA, a Debt Relief Order or a Trust Deed – your details are published on the online Individual Insolvency Register and the Gazette.

The public register places those on it at increased risk of identity theft, and is in direct contradiction to the advice on the Action Fraud website. It also exposes consumers to unwanted marketing when they are at a potentially vulnerable time. We’ve had reports of people getting calls about equity release, bridging loans and, for those on an IVA, being told that they could have their payments reduced by a different provider.

There is also anecdotal evidence to suggest that this loss of privacy puts some people off starting a debt solution that could help them, by perpetuating outdated stigmas about debt and insolvency. Here’s an example of the feedback we’ve had:

During my time working in personal insolvency I spoke to many different people all with different reasons for having the debt they accumulated. The one aspect that always came across was the shame, which was always heightened by knowing they were on the insolvency register. When an IVA ended, you could guarantee that after questioning when they would receive their completion certificate, the next question was always “when will my details be removed from the insolvency register”. It obviously means so much to individuals not to be on a public register.

 What’s more, having personal information publicly available online can pose a particular risk to people – particularly women – who have experienced domestic violence and/or stalking. It is possible to apply to have your details withheld from the register – but the evidence threshold required means some vulnerable people inevitably slip through the cracks.

The future: a closed register accessible to those that need it

Of course, we agree that there is a need for a register of those that are insolvent. Creditors, credit reference agencies and other organisations have a legitimate need to use this data to make informed decisions. We’re proposing that this register would continue to exist, and would still be available to those that need it – it just doesn’t need to be publicly available. A closed register could be accessible to:

 

• prospective lenders, who need to know whether people who apply for credit have a recent history of insolvency. They will do a credit check as part of their decision-making, and the insolvency will show on the information received from the Credit Reference Agencies (CRA). We are proposing that CRAs would have access to the private register.

 

• traders who might need to know about insolvency – when we wrote to the Insolvency Service about this, they said anyone who ‘does business with a debtor, during the period of their insolvency’ might need to be aware that the person is insolvent. We’re not convinced that many traders actually check the Register, but many will use a business information service to conduct checks. Again, we are suggesting that these service providers would have access.

 

• some employers and membership bodies. There are some jobs and roles you are not allowed to hold while insolvent. Again, we propose that any organisations with a legitimate need to access the register would be able to apply to do so.

 

In our view, it has already been acknowledged that such a register does not need to be public – in the design of the new Debt Respite Scheme (aka Breathing Space). There will be a register, run by the Insolvency Service, of those that have entered Breathing Space – but, crucially, the register will not be public. It will be available to debt advice providers and those creditors that will be bound by a customer’s moratorium.

Another way to look at it is to compare the current Insolvency Register with the Criminal Records register. Criminal Records are private, but various firms and agencies can apply to access the register for legitimate reasons. They pay a fee to do so. It seems to us that a similar approach for the Insolvency Register would be both appropriate and workable.

We believe that bringing an end to the public register should be on the agenda of the Insolvency Service and government. We hope to have a constructive debate about providing a private register that could replace it. We are in the process of gathering data on this, and plan to submit it to the call for evidence on the current insolvency rules.

Please show your support for this campaign on social media using #NoShameInDebt.