Questions are beginning to filter through to Visionblue on our development plans for the new Standard Financial Statement (“SFS”), which was released by the Money Advice Service on 1 March 2017.
There is no doubt that this new single approach to preparing a client’s Income and Expenditure ("I&E") on a new IVA will have its advantages, such as:
- Set I&E categories
- No minimum and maximum options of spending guidelines which should reduce modifications
- Single code and functionality in software across the IVA industry
- Easier migrations as mapping data is made easier by set categories
Adopting our processes for new cases appears to be a relatively straight forward decision but things become more complicated when we consider how existing cases should be treated. The first question for me is whether, on an existing IVA, can and should future I&E reviews be done using the new SFS?
Recently, I attended a meeting of the Personal Insolvency Working Group, where a barrister also in attendance raised a concern as part of the discussion on existing IVA’s that have been agreed, and the contract accepted, using a different I&E basis to that of the new SFS. The legal argument being that it may be incorrect to use a brand new basis for an annual I&E review, as this could result in a more favourable outcome for either the client or creditors on the contribution to be paid because the spending guidelines are different.
From a software point of view, it certainly would be simpler to have all new and existing cases swap over to the new SFS at the same time. The legal point mentioned above concerns me however, because no software provider wants to write code swapping I&E screens on all cases to the SFS only to then find this was not the correct decision.
Another thing to consider if existing cases are to swap to the new SFS would be a potential mapping exercise on the client’s last I&E. Should this be converted to the SFS and provided to the client so they have a means of comparison for when they undertake the next review? This may be deemed unnecessary by some Insolvency Practitioners ("IPs") and certainly would save a lot of time if it could be avoided.
If the decision is that existing cases run to closure with annual I&E reviews done in the initial format provided in the proposal then this too could lead to issues. Will there come a time when budget guidelines we use now are no longer updated year on year? What happens then?
Lastly the decision of when to swap to the SFS also seems very open ended. I believe a 12 month transitional period has been targeted but each organisation can make their own choice of when. That makes switching the software over to a new basis, whether just new cases or all, a tricky prospect with multiple customers using the same application but all can choose when they want the switch to occur.
With no legislation setting a fixed date for the transition, would the best thing for the IVA industry be that the creditors, possibly through their representatives, confirm a date from which all new proposals are expected to be issued using the SFS?
The SFS is without doubt a great move but some clarity around an existing IVA and a fixed timescale would certainly assist.
John Smith
Technical Director
