The Insolvency Service has announced changes to the IVA Protocol guidance. In a joint statement by creditor representative members of the committee it said “As members of the Individual Voluntary Arrangement (IVA) Standing Committee we have recognised that the COVID-19 pandemic will impact a number of consumers who currently have or will soon be proposing an IVA. We are providing our agreement to the IVA Standing Committee COVID-19 Guidance.”
“If the supervisor wishes to use their discretion to utilise the guidance, a meeting of creditors need not be called, we would expect the COVID-19 guidance to be used first and any further variations outside of this guidance will be considered on the basis of the original terms of the agreement. We would not expect a fee to be chargeable to the estate. This will enable additional temporary support to be accessed quickly and efficiently by impacted consumers where it is required.”
When the IVA Standing Committee make the decision collectively to remove the guidance our consent to any variations as per the terms of the guidance will be removed and all future changes to the terms of the IVA agreement should be made by formal variation as per usual.
The member of the committee are Watch Portfolio Management, TDX Group, Evolve, PRA Group, MAX Recovery and UK Finance.
Responding to the measures said StepChange Debt Charity and StepChange Voluntary Arrangements said that it welcomed the changes to the IVA Protocol. It said that these changes will enable a degree of forbearance and flexibility to be shown on Individual Voluntary Arrangements to manage payment difficulties arising from the coronavirus crisis.
In essence, the changes enable Insolvency Practitioners, subject to receiving the necessary evidence, to allow the equivalent of 3 months additional payment breaks or reduced payments on top of any existing flexibility.
Broadly, this means that people using an IVA as a solution to manage their debt will have access to similar levels of temporary support as those being offered by many lenders to their customers. This should reduce the incidence of IVAs prematurely being forced to terminate, a route which results in high costs and a loss of the protections that an IVA provides.
StepChange also welcomes the inclusion in guidance issued by the IVA Standing Committee that Insolvency Practitioners should be particularly mindful of the source of the introduction of potential IVA clients during this period. Unscrupulous “lead generators” are a scourge in the IVA market at the best of times, and the charity has already seen examples of opportunistic advertising aimed at people worried about their finances in the wake of the coronavirus crisis for whom an IVA may not be the most appropriate debt solution.
Peter Tutton, Head of Policy at StepChange Debt Charity, said “It is only right that people using an IVA to manage their debt problem should be able to gain access to a bit of flexibility if they face a sudden income shock as a result of the coronavirus crisis without automatically triggering the very expensive termination process. The IVA Standing Committee has recognised the need for a prompt approach, consistent with wider market practice, which is a helpful emergency response. Anyone worried they cannot meet their IVA payment as a result of income shock needs to contact their IVA provider as soon as possible to explore their options.”
Peter Wordsworth, Head of Insolvency and of StepChange Voluntary Arrangements, said “For those of our clients who are currently using an IVA to repay debt, this provides valuable reassurance that we have a degree of flexibility available to us to help them manage temporary payment problems, if they are eligible for this support. We must emphasise that if you can continue to pay as normal then you should – and you must talk to us before missing or changing any payment. Any missed payments still have to be made up and may extend the length of your IVA, so this is not a route to be taken lightly, but the increased flexibility will be a valuable way of reducing the risk of an IVA having to terminate early with all the cost and loss of protection that entails.”
Catherine McNeill, Head of insolvency at Financial Wellness Group said “The flexibility announced by the Insolvency Service is very welcome news for our IVA customers. A small proportion of our IVA customers have contacted us to tell us that their ability to pay has been impacted by the coronavirus crisis, or that they are worried that it will be. Many of these customers have been placed on furlough. In March, we put in place a package of measures to help these customers and our servicing teams transitioned to home working to enable us to continue to support customers.”
“This new flexibility for us to agree payment reductions of up to 25% and to provide customers three-month payment breaks if they need it, and even if they have taken payment breaks before, is very welcome and will help prevent IVA failures. The guidance will also promote a consistent approach across the sector.”
“We are delighted that major creditors and voting agents are supporting these measures. They will help re-assure customers that we are working together as a sector to support them to a successful conclusion of their IVA.”
“Critical workers who earn more, perhaps through additional overtime, during the crisis will also welcome the news that they won’t be expected to pay extra into their IVAs.”