A consultation on the reform of bankruptcy law appears to have broken down as reforms opposed by consultees appear to be proceeding regardless. Alan Mcintosh untangles the mess.

Anger has broken out amongst money advisers over the Scottish Governments Bankruptcy Law Reform. Within a day of the first of a number of industry consultations, many advisers have been left furious and angry at what appears to be the contempt the Accountant in Bankruptcy (AIB) is treating the process and those participating in it.

One of the key issues is should the AIB be able to provide advice.

The day after a consultation event organised by Money Advice Scotland, where the proposal was unanimously rejected by the members present, the Accountant in Bankruptcy advertised it was seeking two advisers to be seconded to a pilot project beginning next year.

The Accountant in Bankruptcy has no legal powers to deliver such a service and no bill is presently in front of parliament proposing they have such powers. Even the consultation proposing they should have such power is not complete. Yet despite it being expected that opposition to it will be overwhelming, the AIB appear to have decided the proposal will go ahead.

The issue is an old one and first arose with the passage of the Bankruptcy (Scotland) Act 1993. The then conservative government rejected the idea as there was a conflict of interest. Since then the idea has repeatedly re emerged and has lead to accusations of empire building by the AIB. More recently in the current consultation, the proposal was made with the assurance that the project will be ring fenced in acknowledgement of the conflict of interest.

The AIB claim they regularly receive calls from debtors asking for help or arriving at their office and need to be able to assist them by delivering advice. The Scottish Government, however, already funds the National Debt Line and either North Ayrshire Council or Irvine Citizen Advice Bureau could easily, with funding, serve the AIBs office.

Why then the need for a duplicate service?

In launching the Bankruptcy Law Reform consultation, Rosemary Winter Scott, the Accountant in Bankruptcy called for “vision and ambition” in redrafting Scotland’s bankruptcy laws, but also worryingly indicated this was a good time for the reforms with the majority government. It’s clear now what she meant with such comments: legislation will be driven through parliament and Government dominated committees will be expected to rubber stamp provisions.

Many like me fear the AIB’s vision of rebalancing Scotland’s bankruptcy law is gradually about eroding independent debt advice and replacing it with more pro-creditor advice. This is an erosion of the principles that advice should be non-judgemental and always in the best interest of the client.

What is shocking in relation to the Accountant in Bankruptcy actions, however, is the cynicism of what they have done. No mention was made of the pilot project at the Money Advice Scotland consultation the day before, despite the attendance of a senior AIB staff member. Instead it was only after the extent of feeling became clear it was announced, possibly to instil a sense of defeatism in people or to entice others fearing job cuts.

Equally disturbing is that the announcement was made through Money Advice Scotland, who knowing the strength of its own member’s feelings, circulated the advertisement seeking advisers to apply. This raises questions about the influence the AIB now have, now they control significant portions of their funding and The Chief Executive is a non executive member of the AIB’s Board.

The decision to announce this project is in bad taste and signals contempt towards the consultation process and those involved in it. If this matter is already decided, what others are?

Rosemary Winter Scott said she wanted vision and ambition during this reform, but already it appears cynicism and distrust is creeping in.

You have to wonder if there is any point continuing with the consultation.