A reader has sent me copies of the documentation that Debt Free Direct (DFD) are asking him to sign to change the terms of his IVA. It includes:
- a Deed of Assignment, which relates to PPI reclaims, and
- a Variation in IVA conditions to adopt the 2014 Protocol.
DFD has over 24,000 IVAs outstanding so this could be a common problem.
*** UPDATE – DFD have replied with detailed comments on this article. See below ***
Deed of Assignment
At the moment DFD and other Insolvency Practitioners are delaying issuing a completion certificate after you have made your final payment until PPI investigations are complete, which may take some time. The Deed of Assignment gives DFD the power to collect any PPI refunds resulting from your debts, even if they are paid after the completion of your IVA. So signing this documentation should mean that you get your completion certificate sooner.
The document appears straightforward. Clause 3 (indemnity) means that you should not be out-of-pocket at all, which would include any tax implications from a refund.
The Deed of Assignment says: “I advise you to seek independent legal advice before signing below”. It is not clear why this is only on the Deed of Assignment, when the implications of the adoption of the 2014 Protocol (see below) may be considerably larger for some people. In my opinion, it is not reasonable to expect people in an IVA to be able to afford to take legal advice. If DFD thinks legal advice is required, then it should be offering to pay for this advice (in the same way that an employer pays for an employee to take legal advice before a compromise agreement is signed).
IVA variation – the 2014 Protocol
It is clear that DFD are proposing that the full 2014 Protocol is adopted, including its change to the equity release clauses. This is highlighted in DFD’s cover letter: “if you are a property owner, the terms of the equity release are changed” and the booklet setting out The Standard Conditions for IVAs states in Annex 6: “Remortgage includes other secured lending such as a secured loan“.
This is the standard new provision that has been brought in with the 2014 IVA Protocol. By itself it doesn’t mean that DFD intend to invoke the secured loan provision, but as DFD have highlighted the equity release changes and not said that they won’t invoke the secured loan provision, my working assumption is that they will use this if possible.
My previous article on the 2014 Protocol pointed out that, for some people, secured loans may be both easier to obtain and more expensive than a remortgage, so this change has the potential to be significantly detrimental to some people with IVAs.
Additional explanations of the secured loan change are required
In my opinion, summarising the effect of the equity release changes in the cover letter as “affordable and fair” is not helpful. Instead DFD should mention the secured loan provision in the cover letter and explain more about how it might be used:
- People who have not yet reached the equity release point in the 5th year of their IVA should be given comparisons of how a secured loan as compared to a remortgage might affect them.
- People who have been unable to remortgage (including those who have completed all IVA payments) need to be told if agreeing to the Variation means that this decision will be revisited.
Some recipients are saying that the documents are difficult to understand. One document is out of date and a separate letter explains that “any references to ‘Standard IVA Protocol 2013′ should be read as Standard IVA Protocol 2104; any references to terms and conditions 2012’ should be read as Protocol terms and Conditions 2014; Any references to ‘Standard Terms and conditions issued in July 2012’ should be read as Standard Terms and Conditions Issues in January 2014.” As there are material differences between these documents, this seems to me to be confusing and undesirable.
Do you have to agree to these changes?
No. You don’t have to sign the Deed of Assignment nor agree to the Variation of IVA Terms. If you do not, your IVA will continue on the current terms. It may be that you will have to wait a while after making your last IVA payment to get your completion certificate, but you may feel that this isn’t important for you.
I cannot give you advice on whether to sign these documents: I am not a lawyer; the documents I am looking may not be identical yours; I do not know the terms of your IVA; and I do not know anything about your financial circumstances. In other words, I hope you find this article informative but it is not legal advice and the conclusions that I draw may not be appropriate for you.
That said, if I was asked to sign these documents, I would be happy to sign the Deed of Assignment. But if I had a house I would not agree to the variation of my IVA terms unless DFD were prepared to assure me in writing that I would not be required to take out a secured loan.
Can you only sign the Deed of Assignment and not the Variation?
I don’t see why not, but really only DFD can answer this question.
Can you change the Variation so that the 2013 Protocol is used not the 2014?
I suspect not. Using the previous version was the way DFD originally drafted their changes. After you agree to a variation DFD have to get your creditors to agree, so at present they are sending schedules of IVA clients who have agreed to the relevant creditors. This would be much more complex if some people have different variations given the large number of IVAs involved.
REPLY FROM DFD
I asked DFD if they would like to comment before I published that post, but they couldn’t get back to me by our agreed deadline. Three weeks later, DFD sent me comments on that post. They have asked me to quote them verbatim, so you can download the document here. As there are 6 pages of details, I am only going to mention a few points here and I suggest that you should read the full document.
“Property obligations will not be reopened”
Some clients receiving these variation documents have completed all their IVA payments or passed the ‘equity release decision point’ and are making additional IVA contributions because they were unable to remortgage. I was most concerned whether these particular clients might find that the equity release decision would be reopened if they agreed to the variation, because of the 2014 protocol’s reference to secured loans.
DFD have provided welcome clarification on this point: “Where obligations in respect of property have been complied with before the variation to terms takes place, no further action is necessary. In other words, once dealt with, property obligations will not be reopened.”
So that is clear. If you have passed the equity release point in your IVA and it has been accepted by DFD that you could not remortgage, this decision will not be revisited if you agree to the proposed variation.
There are two sets of variation documents
DFD say they have sent out two different sets of variation documents. I have only seen one set. It isn’t clear to me how the sets differ and whether this is substantive. DFD have pointed out that my reference in my previous post to “clause 3 (indemnity)” is only correct for one of the sets.
What are the benefits?
DFD state that a single set of terms will benefit everyone. I agree with this as a general approach. However, for someone who is already in an IVA, the question is what specific benefits will accrue to them by agreeing to vary their existing terms. DFD refer to “multiple benefits” but do not list these; it may be difficult to give broad-brush generalisations. You could ask DFD if they could detail what the benefits would be for your specific case.
You are encouraged to contact DFD with any queries
DFD would like to emphasise that every IVA can be different. They encourage you to contact them directly to discuss any queries that you may have, on 0844 826 0625 / email email@example.com ; or consult a 3rd party independent qualified legal/insolvency advisor.