23 Jan 2025 | Posted In Money advice news

Citizens Advice’s latest report entitled ‘Back to Square One’ explores how poor debt advice is pulling people into inappropriate Individual Voluntary Arrangements (IVAs).

It says:

“IVAs are a type of fee-charging debt solution, widely marketed to people with unmanageable debts. Whilst in some circumstances an IVA will be the most appropriate debt solution for someone’s situation, they are risky remedies that attach high fees, and where people are unable to keep up with repayments they can fail leaving people in a worse position than they started. For a long time we have been raising the alarm on poor selling practices in this market, that are seeing people pulled into these solutions where they are not right for their circumstances.”

Its previous report Set Up To Fail exposed how this market is failing people in debt distress. This new report  provides up-to-date evidence on issues in the IVA market, and the impact of inappropriate IVAs. The findings are based on a survey of over 1,000 people who are currently in an IVA or who have been in the last 5 years, including those with terminated, complete or ongoing IVAs. Key findings include the fact that:

  • People are frequently being put forward for unaffordable IVAs
  • People are not being told about alternative debt solutions; and
  • People are regularly not being told key product information.

Citizens Advice is calling on the government and regulators to take urgent action to fix this broken market, and protect people from being driven into inappropriate debt solutions. It says they must work together to:

  1. Drive up the quality of advice – Government must ensure people are given independent and impartial advice before entering an IVA. This can be achieved by ending the IVA exclusion.
  2. Strengthen supervision – Citizens Advice supports plans to bring IVA firms into direct regulation to give the Insolvency Service more power to set standards and take action against bad practice. It says that Ministers must make passing the required legislation a priority and the Insolvency Service and FCA should step up supervision efforts – driving increased compliance in the immediate term with all the powers they currently hold.

In the longer term, Citizens Advice believes that the Personal Insolvency Review provides an opportunity to explore more fundamental questions, and reform the suite of debt solutions to deliver better consumer outcomes.

Read the full report here.