For years the insolvency industry has set its own fees – of up to £600-an-hour – but not any more.
The Government has just brought in a new law following years of complaints about overcharging.
Since October 1, insolvency firms must supply an up-front estimate before taking on a job and – if agreed by creditors – the fee is ‘capped’ by law.
It can only be changed by agreement between the insolvency practitioners and those owed money.
Business Minister Jo Swinson said: “Insolvency practitioners do important and specialist work realising the assets of failed companies for distribution to suppliers and others owed money.
“Initial fee estimates, which can only be changed by agreement, will strengthen the position of those owed money to ensure that fees are fair and reasonable.
“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.”
Paul Moorhead, of Moorhead Savage, in Rotherham, said it should help prevent abuse of the system.
He added: “There has been public disquiet for a number of years over the fees charged by some practitioners. The Government has decided to act.
“The vast majority of insolvency practitioners do a proper job. But some have felt they can charge high fees because they don’t think they can be challenged. Some have set fees up to £800-an-hour if they can justify it.
“Creditors could challenge fees through the courts but there’s some apathy about that.”
Paul, who set up as an insolvency practitioner after his own business failed, insists he understands the pain of the process.
He added: “ I think we do try very hard to look at all the options.
“We give out a huge amount of free advice. All our initial meetings are free.
“Until you know what the situation might be you can’t start charging.”