Debt Consultants Trustees. Major changes proposed by the Office of the Superintendent of Bankruptcy (OSB) to curb debt consultants.
The OSB notified Licensed Insolvency Trustees (LITs) on August 23, 2017 of major changes being proposed affecting:
Debt Consultants Trustees: Where trustees can conduct their business outside their residence offices. The principle objectives for the new requirements will include:
a high standard of client service offering for BIA insolvency services where LITs wish to operate offices.
transparency on the availability of consumer service at different types of LIT offices.
a level playing field for LITs regarding the geographic operation of offices where they offer services.
prohibiting delivery of BIA insolvency services at unauthorized locations, including those associated with incompatible activities and the operations of unlicensed third parties
Debt Consultants Trustees: How assessments are to be carried out. Clarified LIT requirements for the assessment of an individual debtor are proposed to ensure:
An LIT is accountable and responsible for all elements of the debtor assessment process.
Debtors understand the insolvency process and receive high quality advice and service from their LIT throughout the duration of their insolvency, as well as the information they need to avoid paying unnecessary costs.
Individuals the LIT involves in the assessment process have the necessary competencies, knowledge, experience and education to independently and accurately perform prescribed assessment requirements; and they are without any real, potential, or perceived conflict of interest with the interests of the debtor they serve.
Statutory and estate documentation is prepared by the LIT, with objectivity, and that completely and accurately represents the debtor’s financial situation.
The OSB, LITs and debtors have increased opportunities to identify non-compliance related to the debtor assessment process.
The OSB’s major conclusions in the report on Debt Consultants Trustees, were:
“Based upon the observations presented in this report, the OSB has determined that administrative practices of LITs who enter into relationships with debt consultants can place the integrity of the insolvency process at risk and can negatively impact the financial interests of both creditors and debtors in an insolvency filing.
Numerous practices observed were inconsistent with the intent and objectives of the BIA and OSB Directives vis-à-vis Division II proposals. The same practices also have the potential to diminish the perceived objectivity and professionalism of the LIT, whose credibility as an officer of the court is essential to maintaining trust in and efficient and effective operation of the insolvency process.
It is important to recognize that ongoing compliance monitoring by the OSB does not suggest that the business practices observed during this review and described in this report are applicable to the general LIT population of about 1,000 active professionals who consistently demonstrate high standards of rigour and professionalism in the administration of insolvency estates.”
Debt Consultants Trustees. Consultations on the new measures are planned for the fall of 2017, with implementation and compliance measures coming into effect in 2018.
The Office of the Superintendent of Bankruptcy issued this warning on their website about debt consultants.
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