If you want to talk about setting up an Individual Voluntary Arrangement (IVA) and whether it is a good debt solution for you, which firm should you talk to?
You could put IVA into google… but how do you decide which of the tempting “see how much of your debt you can write off” links to click on?
Or you could choose the person that cold calls / texts you telling you about a little known government scheme… I agree with Mike O’Connor, StepChange’s CEO, when he said :
“Before taking out any financial product, people need to know whether it is right for them, work out if they can afford it and shop around for the best deal, but unsolicited phone calls can take these key decisions away from them. It is not a good way to sell credit or financial services and it is certainly not a good way to buy them.“
You could put your postcode into the Insolvency Service Find an Insolvency Practitioner page. But that doesn’t tell you much, especially if you don’t particularly need a local person and would be happy to talk over the phone to anyone.
IVA firms are not all the same
This problem wouldn’t be important if the IVA and the level of service you end up with are all the same whichever firm organises it. A Debt Relief Order is a standard product: it doesn’t change whoever sets it up, so the only thing you need to choose is if you would prefer face-to-face or phone advice.
IVAs aren’t like that at all. These are long term commitments that can go wrong. Even if everything goes well in your life, you will be having annual reviews. If you have unexpected expenses or reductions in income, you are going to need to be talking to your IVA firm about what your options are.
What information would help you make a good decision?
- Failure rate Anecdotally some IVA firms have a failure rate of less than 15%. Other have more than 30%. This is a key fact for you to know, so why can’t these be published?
- Length of IVAs IVAs are often sold as “5 or 6 year arrangements” but in 2015 12% of IVAs from 2008 were still going, and 5% of IVAs from 2006. That is getting to seem like a life sentence, not a debt solution.
- Time to issue a completion certificate Some firms get most certificates out in less than three months after the final payment, others have many IVAs still open after a year. I know PPI is a complicating factor, but some firms seem to handle this a lot better than others! If you had the information, you could choose a good one.
- Level of fees You may not think this matters, as they just get taken out of your payments. But if your IVA fails, or you inherit some money, or you decide to sell the house and end the IVA early, then the fees do matter to you.
Does it make that much of a difference?
Yes it does! Some firms are simply better than others – they won’t propose IVAs that have little chance of succeeding and they put more effort into working with a debtor during an IVA to try to prevent it failing if things start to go wrong. Contact and support early on can make a huge difference to whether an IVA succeeds.
Without published information how can you tell who to go to? You should take glowing reviews on their website or Trust Pilot with a huge pinch of salt. It’s OK to choose a hotel from TripAdviser but an IVA is a complicated legal contract that lasts years – “They were so friendly and helpful” may have been right when the IVA started, but what about three years down the line?
In December 2016, Govan Law Centre, a respected Scottish advice centre said that two firms in Scotland arranging Trust deeds – the Scottish equivalent of an IVA – had a failure rate of nearly 90%. Mike Dailly, the centre’s principal solicitor, said:
For those firms with a high failure rate what is happening is the consumer thinks they are making payments to creditors, but no dividend is ever paid to creditors, with thousands of pounds in each case being charged by the firm as a fee.
IVA statistics should be published to ensure this can’t happen in England, Wales and Northern Ireland.
Why can’t the information be published?
Much of this data already exists. The Insolvency Service will have some. TDX collects a lot of this information and already lets the firms know how they are ranking.
I don’t think this sort of data is the only thing that matters. If you want to go for a small local firm then of course they won’t have hundreds of completing IVAs each year. I think consumers can cope with the idea that it’s not always best to go to the “top” firm if you find one that you are very comfortable with.
But I don’t think there is any good reason to keep customers in the dark about important facts. I think it’s time to publish this data to let customers make an informed choice about which IVA firm to go with.