Which are the best IVA firms to talk to if you are interested in an Individual Voluntary Arrangement (IVA) and whether it is a good debt solution for you?
If you put IVA into Google, 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.
Those are seriously bad ways. These firms are advertising, cold calling and paying a lot of money to get high up on Google’s pages because they expect to make hundreds of pounds by selling your details to an IVA firm, who will then make thousands of pounds in IVA fees.
An IVA may be a great option for you, but you need good advice from someone whose main interest isn’t their own fees!
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 sort of service you end up with are the same whichever firm you use.
But IVAs aren’t like that. They are long-term commitments 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 have to talk to your IVA firm about what your options are.
Don’t explain what may happen in your IVA
You need to know what will happen to your mortgage, your pension, your car finance, what if you get a pay rise or a bonus, what if you need to move house etc.
All too often problems in these areas are not discussed before you start an IVA.
Anecdotally some IVA firms have a failure rate of less than 15%. Other have more than 30%. It’s obvious which firm you would prefer to use!
And failure rates appear to be getting worse again. In January 2020 the Insolvency Service published statistics showing that:
- over 8% of IVAs started in 2018 failed in their first year;
- more than 25% of IVAs started in 2016 had failed in their first three years.
We won’t know how many of the IVAs started in a particular year have actually failed until 7 or 8 years after they started. But it looks as though failure rates for 2016 and afterwards are going to end up being over 30% if more than a quarter have failed in the first three years.
And these trends are getting worse. It seems that more and more people are being mis-sold IVAs.
Length of IVAs
IVAs are usually promoted as “5 year arrangements” but problems and payment breaks often mean they go on for much longer.
Of the IVAs started in 2010, 27% have failed and 10% are still running – so only 63% of these IVAs have actually completed successfully. For a product that is sold as a simple and affordable way out of debt, this is a dismal track record.
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 a year later.
Level of fees
You may not think this matters, as the fees are taken out of your payments so they don’t cost you directly.
But if your IVA fails, you inherit some money, or you decide to sell the house and end the IVA early, then you do end up paying the fees.
Your IVA may be transferred to another firm
Some IVA firms will sell blocks of IVAs to a different firm. Others go out of business so all their IVAs in progress have to be transferred.
This can be very annoying if you were happy with your IVA firm. Often the firm taking over the business gets a big systems and administration problem transferring all the details.
The dreaded secured loan clause
Some firms try to make you get a secured loan at very high rates of interest in the last year of your IVA. You want to avoid these firms, but how can you tell which they are?
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 you 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 your IVA succeeds.
You should take glowing reviews with a huge pinch of salt. They were so friendly and helpful may have been right when the IVA started, but what about three years down the line?
You are can’t change IVA firms if your IVA firm becomes difficult to deal with, so choosing the right firm at the start is important.
Why can’t the information be published?
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 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. How is someone suppose to take one of the most important financial decisions of their life without any information?
I think the Insolvency Service should publish some data to enable customers to make an informed choice between IVA firms. The increasing IVA failure rates reported in January 2019 should be a wake-up call for the Insolvency Service – they need to act to prevent this getting worse.
But at the moment this isn’t happening.
So if you are looking at an IVA, I suggest you first talk to a free sector debt advisor such as National Debtline or your local Citizens Advice and first of all get some advice that an IVA is suitable for you.
And if they say an IVA is your best option, I suggest you talk to StepChange. I see fewer complaints about their IVAs than most other large firms.