Debt forum threatens legal action over IVA charges
The Debt Resolution Forum (DRF), which exists to represent advisors and companies within the debt management industry, has accused High Street lenders of preventing thousands of families struggling with their finances from accessing debt settlements.
The Forum, which represents 28 firms, including ClearDebt and Accuma, believes that lenders are imposing artificial barriers on those who could use Individual Voluntary Arrangements (IVAs) as a way of avoiding bankruptcy.
As a result, it is considering a legal challenge to recent changes in the fees imposed by the Insolvency Exchange, which represents leading lenders such as HBOS.
DRF claims that the new charging structure could make many IVAs unviable and drive debt advisors out of business.
Should this happen, a sharp increase in the number of bankruptcies is likely to result.
The Insolvency Service, which is part of the Department for Business and Enterprise, has already publicly stated that many creditors are refusing to make use of IVAs, if the fee is above a certain level.
Meanwhile, the banks are taking the view that IVA providers are selling IVAs as a means by which debtors can get out of their obligations.
Comments (1)
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People who use IVAs to deal with their debt are, very definately NOT “getting out of their obligations”. Most have debt they can’t deal with because of circumstances that have changed beyond their control. Most want to do the best they can to deal with their debt - an IVA means five years spent carefully budgetting and making ends meet.
IVAs may, typically, cut a person’s debt in half (and sometimes better), but the person in an IVA is doing their darndest to repay as much as they can - frankly most creditors should be a little more liberal in their attitude to what constitutes acceptable costs of living: They are dealing with people who will be good future customers; people who have learnt to manage their money and who will have a surplus to put into savings and pensions, etc.
It’s those who choose bankruptcy that walk away from their debts - and the banks get less from bankrupts too: so why not encourage the IVA?