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!
Tens of thousands of people a year may be sold an IVA when there is a better (cheaper, quicker, less risky) debt solution for them. The regulators are trying to reduce some of the IVA mis-selling, but that won’t help you at the moment.
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.
At the end of 2021, it seems that the failure rates for IVAs are likely to be more than a third. Anecdotally some IVA firms have a failure rate of less than 20%. Other have more than 40%. It’s obvious which firm you would prefer to use!
And these trends are getting worse. It seems that more and more people are being mis-sold IVAs. And inflation will cause problems for many IVAs in 2023 and 2024.
Length of IVAs
IVAs are usually promoted as “5 year arrangements” but problems and payment breaks often mean they go on for much longer.
Take the IVAs that started in 2016. By the end of 2022, those IVAs started 6-7 years earlier. The statistics show that at the end of 2022, of the 2016 IVAs:
- only 48% had completed;
- 33% had failed, leaving people back with their debts;
- 19% were still running.
For a product that is sold as a simple and affordable way out of debt in 5 years, 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 more than 6 months 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 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 supposed 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. 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. Their failure rate is a lot better than average, I see fewer complaints about their IVAs than most other large firms, and I have never seen them try to push anyone to take an expensive secured loan to release equity at the end of the IVA.
What you should ask an IVA firm that you are talking to
A good firm will make sure that you understand all the details of your IVA proposal. In particular:
- if you have a house you need to understand how the equity release in year 5 works. Ask for various examples based on your house value and mortgage to show when you would need to remortgage/get a secured loan and when you might need to make an additional year’s payments.
- ask the firm if it is their policy to make people take a secured loan. If they say you will have to consider it, ask what sorts of rates people are being quoted at the moment;
- make sure you understand if there is any impact on your pension, see Is my Pension safe in an IVA?
- if you have car finance ending during the IVA, ask the firm what your options will be. Do not be reassured by “oh that will be fine, you can get another finance contract” – you won’t be able to except at a horrible rate of interest, possibly over 40%.
Also ask who will administer your IVA. Some firms that set up an IVA then hand you over to a different firm to supervise the five/six year IVA. I don’t think this is a good idea. You also need to be able to have someone you can talk to about problems that occur, not be passed to some “warehouse” abroad where you are just another case number.