Since their inception in 1986 the number of IVA’s approved by creditors has steadily increased year on year, (allowing for declines in 2008 and 2015), with 2018 projected to be yet another record-breaking year. The introduction of the IVA Protocol in 2008 gave IVA’s more credibility. The protocol followed working party consultation headed up The Insolvency Service who concluded that IVA’s played an important role in helping people deal with unmanageable debt but the process needed to be streamlined and the costs needed to be reduced.

The Protocol provides for marketing to be fair and transparent, guidance on how income and expenditure is to be assessed, clarified how equity was to be dealt with in residential properties and also covered the marketing of the IVA’s to ensure that people proposing an IVA clearly understand the process and their obligations.

In the quarter to 30th June 2018 the total number of IVA’s approved hit a record figure of 17,987.  Post credit crunch IVA approvals topped only 13,200 per quarter. The increase is predominantly due to increased marketing by large IVA providers and also increasing numbers of “IVA packagers” who have entered the market and are targeting individuals with debt issues. These packagers generally earn between £700 and £1,200 for referring these cases to IVA specialist practices.

The Insolvency Service, a government agency, has recently issued a report on the regulation and monitoring of Insolvency Practitioners. The Insolvency Service has accompanied the regulators to visits to volume IVA providers and their observations include:

  • Debtors not provided with full and appropriate advice. Rather it appears that debtors were steered towards an IVA without being adequately advised about other options available.
  • Income and expenditure being manipulated to improve the chances of an IVA being approved
  • The debtor’s expenditure was seemingly manipulated to deliver an ‘on paper’ surplus monthly income of over £50 so that an IVA could be proposed and agreed.
  • Debtors were being steered towards an IVA due to the effects of bankruptcy, when in reality bankruptcy may have been the most appropriate option and would have had little or no more impact on the individual.
  • In some instances, there was also evidence that introducers (who are often not regulated and therefore outside the scope of the RPBs or FCA) may be misleading people about the bankruptcy process, including suggesting that bankruptcy would require the consent of creditors.

Entering an IVA requires serious consideration. Individuals struggling with debt issues are usually quite stressed and do not easily digest information. It is easy to mislead these individuals with compelling language and many of the IVA packagers websites do this – 3 easy steps to see if you qualify for an IVA or write off up to 80% of your debt!!

The Debt Advisor have been proposing IVA’s for almost 20 years. We chose to go down the route of gaining authorisation and regulation by The Financial Conduct Authority in addition to our Insolvency Practitioner being regulated by The Insolvency Practitioners Association.

We embrace compliance and regulation and want to make sure that we only recommend IVA’s that are appropriate and represent the customers’ optimum choice. Take a read through some of our IVA case studies here for examples of how we have helped customers with appropriate and innovative IVA proposals.

The Dear CEO letter that has been sent by the FCA to Debt packagers has strong links to the Insolvency Service report on poor practice and compliance with volume. This is a very stark warning to those who are packaging IVA’s to send to the volume IVA providers, that they need to get their house in order. I would not be surprised if the FCA then announced a thematic review of businesses offering debt counselling. This is long overdue and should help to cleanse the industry of the Get Rich Quick merchants out there who have scant regard for the best interests of consumers.

Beverley Budsworth, Managing Director, The Debt Advisor