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 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.
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.