Research shows concerning level of poor practice in the IVA market
Insolvency Service working with regulators to improve support for people with debt.
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Research was commissioned by the Insolvency Service in light of concerns about the Individual Voluntary Arrangement market.
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Of the 310 terminated IVAs that were examined, 60% showed evidence of poor practice by providers.
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The Insolvency Service is working with the industry’s regulators to address the situation.
Latest research commissioned by the Insolvency Service has shown evidence of poor practice among providers of Individual Voluntary Arrangements.
Individual Voluntary Arrangements (IVAs) are a legally binding agreement between a person who is insolvent and their creditors.
They are administered by licensed Insolvency Practitioners, usually last for between five and six years, and give people the opportunity to pay an affordable monthly contribution towards their debts.
After concerns were raised about the way IVAs were being offered to people who signed up to them, the Insolvency Service commissioned independent research to look into the market.
The research, which has been published today, looked at 310 randomly selected IVAs which had been both registered and terminated between 2021 and 2023, and found that 60% showed evidence of poor practice in the early stages.
Examples of poor practice included people’s income and expenditure not being recorded accurately by providers, other debt solutions being incorrectly dismissed and providers failing to make sure people understood what they were signing up to.
Claire Hardgrave, the Head of Insolvency Practitioner Regulation for the Insolvency Service said:
Poor practice in the IVA market isn’t in anyone’s interest. It is bad for the economy, for creditors and providers, and it has negative consequences for people dealing with problem debt, including those who are vulnerable.
While IVAs can work well for many, if an IVA is unsuitable it can leave people struggling with their household budget, being in debt for longer, or even taking on more debt to make their IVA payments.
We are working with the industry’s regulators on ways to improve this important area of support for people with debt, to make sure they are always given the best advice.
Across England and Wales, a total of 64,050 IVAs were registered in 2023.
The agreements freeze a person’s debts, stop recovery action and provide debt-relief, allowing them to become debt free over a set period. They often provide a better outcome for consumers and creditors than alternative debt solutions, such as bankruptcy.
Despite steps to improve poor practices over the past few years, the Insolvency Service has still received reports of poor practices, including aggressive marketing towards people in financial distress which fails to mention the fees which organisations charge or the cheaper alternatives available.
Following the publication of its research, the Insolvency Service is continuing to progress its work with regulatory bodies on actions to improve the IVA market.
Measures being investigated include creating new advertising protocols, simplifying the process for people entering IVAs, making sure people are presented with more information before they sign up to an IVA and providing better training for Insolvency Practitioners’ staff.
Anna Hall, Corporate Director for Debt at the Money and Pensions Service, said:
This research shows how incredibly important it is that those who are struggling with debt have access to free and impartial advice, helping them to understand the best way to manage their financial situation.
For free and impartial guidance, visit MoneyHelper.org.uk to access our debt advice locator tool which provides information about free and confidential debt advice online, over the phone or near to where you live.
A debt adviser will treat everything you say in confidence, never judge you, and will suggest ways of dealing with debts that you might not know about.
For more information about IVAs and this research, see here.