Code Of Conduct

Mike Thomas looks at a recent forum that addresses the issues surrounding IVAs
On Thursday 31st May 2007, the British Bankers Association, BBA, held an Individual Voluntary Arrangement, IVA, forum with the industry's top IVA providers, the purpose of the meeting was to finalise new code of conduct covering the way IVA's are advertised and implemented.

Approximately 140 attended representing most of the High Street lenders and prominent Debt Management Companies. The findings of each working party were reported, click here for more in-depth details of each working party group, my concern is that there were no actual debtors actively involved with any of the working parties although CAB and CCCS participated. In the afternoon session there was open discussion which covered how the recommendations could be implemented and various dates were agreed upon.

The purpose of the meeting was to proceed further with ideas and concepts on making it simpler to process the current format of IVA's and also to improve the way IVA providers advertise their services. It was proposed that there should a standard income & expenditure form, cover sheet and a set of standard terms and conditions and once this has been initiated then it is envisaged that it will take less time to administer each proposal thus reducing costs and therefore giving a greater return to banks.

Some lenders have been concerned that a few 'less reputable' IVA firms are using heavy handed tactics and miss informing debtors to coerce them into IVA's just to get the upfront fees. The banks believe that some debtors should have gone bankrupt in the first instance as in reality they cannot afford to make payments throughout the term, usually for a period of 5 years. They feel the IVA provider should have more incentive to try to rescue and keep the IVA on track. It is a common clause in IVA's whereby failure to keep to the terms of the arrangement can lead to the debtor's bankruptcy. To encourage this the BBA is looking at the set up fees charged by IVA companies and are considering asking for these fees to be reduced and be spread over 3 - 5 years.

There was also consideration made as to publishing league tables for Insolvency Practitioners detailing their success rate. I have no problem with this as long as there is a table identifying the lenders that reject IVA's, for whatever reason.

Individuals petitioning for bankruptcy are rising because IVA's are becoming more problematic, rejection rates at creditors meeting are increasing, lenders are constantly upping their dividend return and in some cases demanding too much from debtors. If more and more debtors selected bankruptcy instead of an IVA then there is a risk that bankruptcy could be seen as a credible alternative to dealing with a burdening debt crisis this country now finds itself in.

If this were to happen then the banks would be worse off financially as bankruptcy often yields very little return due to the fees involved to administer a bankrupt's estate, furthermore any repayment period is greatly reduced in a bankruptcy, usually 3years as against 5 years in an IVA. One delegate raised the point that perfectly good and viable IVA's were being rejected by a select few lenders which he said was against the British Bankers Association, BBA, guidelines and that debtors were suffering severe hardship as a result with no real prospect of ever getting out of debt. I agree as I have substantial evidence that is occurring.

On the positive side they all met in one room and there is hope that matters will be resolved in the not too distant future so that those individuals that need help will get it and that the banks and credit card companies will stop denying the appropriate option to seriously indebted individuals. Perhaps when Simple Individual Voluntary Arrangements, SIVA's come in, expected April 2008, then this new format for IVA's will bring stability and confidence back to the industry.

My view of the industry is as follows; on one side we have the banks wanting to get as much money back on bad debts as they can and any bad news re insolvencies could have a bearing on their share price. On the other hand IVA providers feel that there is no support from the banks or the Government in educating, helping and informing seriously stretched debtors of all their options. As a result IVA providers have to find extensive advertising costs in securing clients that need help, more and more regulations are being imposed upon them and yet the lenders want the fees to be reduced and see these additional costs as irrelevant. One point worthy of note is that the larger players generally only have 3-4% of their calls converting into IVAs and generally give advice for free in remainder of the calls.

Not only do the banks want to dictate who they lend to but there is now growing evidence that they also want to manipulate and control the options available to debtors when they are seriously in debt, believing the debtor will not go bankrupt and instead enter into a long term repayment programme other an IVA, and this could seriously backfire on them. One has to ask is there any credence that lenders are worried about their share price if IVA's continue to increase and are they trying to keep the lid on insolvencies?

More information on all debt advice as well as how to reclaim those bank charges can be found at or by telephoning 01376 563 365.

In the preparation of this article, every effort has been made to offer the most current, correct and clearly expressed information possible. However, it is not intended to serve as legal advice and you are encouraged to consult with professional advisors for advice concerning specific matters before making any decision.

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