Many people have been mis-sold IVAs when they had a better (cheaper, quicker, less risky) debt option available. These other options were ignored or not properly described by some firms that should have given proper debt advice.
IVAs are the only debt solution in England, Wales and Northern Ireland that generates large fees for the firms setting them up. These fees can distort debt advice given by commercial firms making them more likely to recommend an IVA which is not in the best interest of the client. There is no evidence this is happening in the not-for-profit sector.
Regulators are at last deciding to tackle this problem. After sending a warning Dear CEO letter in October 2018, the Financial Conduct Authority (FCA) is now proposing to ban debt packagers from making fees by IVA referrals. The Insolvency Service is promising a review of personal insolvency in 2022 and has just started a major consultation on Insolvency Practioner regulation.
This article has a recent case study from a mystery shop, looks at the scale of the problem and gives a summary of the regulatory changes that are being considered. In this article, I just refer to IVAs, but all the points also apply to Protected Trust Deeds (PTDs) which are the Scottish equivalent of IVAs.
Contents
An example of IVA mis-selling
Debt advisers can’t give details about actual cases because of client confidentiality. But I can show you an extract from the email I was sent by an FCA authorised firm. I have told the FCA who this firm is, but I will just call them XXX here.
The marketing email
What Can We Do?
We can help reduce your payments so that debts are consolidated and become much more affordable to you. This will help you if your income does get reduced. We will ensure all payment plans remain affordable no matter what happens with your finances.
We can freeze your interest. This stops creditors adding extra charges and interest to your payments to keep them as low as possible and means your debt level will not get any higher whilst you are facing struggles.
– We can write a percentage of your debts off and give you legal protection from your creditors. This stops your creditors from trying to hassle you or asking for any further payments. This will help reduce some factors of stress that you may be currently facing.
My Debts Have not Defaulted And I Can Afford The Minimum Payments, Can I Still Get Help?
– Yes, everyone in the UK is entitled to seek help with their finances regardless of their circumstances. We understand you may be managing your payments fine just now but if your income drops or you are faced with challenges at work that will lead to a reduction in your wages, will you still be able to afford your credit
commitments? One of our main jobs at XXX is risk management. We help you put a plan in place now to stop any future scenarios from causing problems. Keep yourself protected by planning ahead.
Who Can You Help?
We can help everyone in the UK who is above the age of 18 and has credit commitments. We look at all occupations including Employed, Self-employed & unemployed as long as you are in receipt of benefits. We can also help homeowners, Tenants and those who are flat-sharing or living with family/friends – as long as you have a postal address, we can help you.
Two of the many problems with the email are:
- no real debt adviser would ever say they can “ensure all payment plans remain affordable no matter what happens with your finances” or “stop any future scenarios from causing problems“. Great sales pitch – but utterly impossible.
- it listed bankruptcy and debt management plans as an alternative, but made no mention of Debt Relief Orders, even though these are more common than bankruptcy. Many of the clearest cases of IVA mis-selling happen when someone with no assets to protect is sold an IVA, when they may have been debt-free in a year in a DRO with no monthly payments at all, and just a single £90 fee at the start.
Mystery shopping
I decided to Mystery Shop them. I phoned and said I had about 15k of credit card debt, in work, renting, paying the minimum payments at the moment without a problem but being worried I may lose my job in early 2022.
I was asked if I could afford to pay £100 a month? Oh yes, I replied, I am paying a lot more than that now, but I am not sure that I could afford that if I lose my job.
They explained what an IVA was and how it was much better than a DMP. I asked if I could have an IVA as I was paying the minimums every month and was told yes, I was probably paying too much at the moment.
I asked again what would happen if I lost my job and I was told I just had to tell my IVA firm. There was no mention that an IVA could fail, I was left with the impression it would all be fine.
This sales job was wrong in every possible way:
- XXX had not asked what my income or expenses were. They knew nothing about my situation when they proposed an IVA paying £100 a month. It was not clear I needed any immediate help with my debts, let alone a form of insolvency;
- they dismissed a DMP without mentioning that an IVA was a form of insolvency;
- I had not mentioned any assets, so even if I did need an insolvency solution (unlikely) either a Debt Relief Order (DRO) or bankruptcy would probably have been better;
- IVAs should not be proposed unless they are likely to be sustainable – my concern about redundancy in the next few months should have ruled it out.
Would a dodgy referral be weeded out by good advice from IVA firms?
XXX is a “debt packager”. They don’t set up IVAs themselves. They just collect details of people who supposedly need an IVA and sell them to an IVA firm.
You would hope an IVA firm would take one look and reject the case I presented with. But the FCA has found that where a debt packager recommends an IVA, in 85% of cases one is set up.
When debt advisers have been trying to sort out why an IVA has failed, clients sometimes report that they were advised to change their income or expenses so that the IVA would be accepted.
My guess is that I would have been encouraged to increase my expenses to show that the minimum payments weren’t affordable. In other cases, clients have been encouraged to reduce their expenses so it looked as though they could afford the proposed IVA payment.
IVA mis-selling – tens of thousands of people a year
Insolvency statistics show that IVAs have more than doubled since 2015, but bankruptcies and Debt Relief Orders (DRO) are little changed. And more IVAs are failing, many in the first couple of years. The only plausible explanation for both these statistics is that IVAs are being mis-sold to people who are unable to keep up with the monthly payments.
The FCA found that about 14,000 people in one year entered an IVA after a recommendation from an FCA-authorised debt packager firm. The FCA says:
in our evaluation of a sample of customer files where a recommendation of an IVA/PTD or a DMP/DAS was made, we had serious concerns with 90% of the files we reviewed.
So more than 10,000 people a year may be entering an IVA after advice from an FCA debt packager which the FCA has serious concerns about…
Not all IVA leads come from FCA debt packagers. Leads from FCA-authorised debt packagers maybe about 20% of the total IVA market. Many come from firms that are entirely unregulated. There is no reason to think that these leads are of better quality than those from FCA debt packagers.
Bad advice to enter IVAs is not the only problem
The FCA says about 45% of people contacting a debt packager are given little or no advice at all. After a couple of questions, they are simply told to contact a not-for-profit debt advice firm.
At least they aren’t being mis-sold an IVA. But this is very unhelpful for people with big debt problems. It’s common for people to delay taking debt advice and to be worried by what may happen. For them to respond to an advert offering to write off 81% of their debt, is a big step. When told to go somewhere else, they may simply give up.
There is no follow-up on these cases. When a debt packager refers you for an IVA, you will get emails and phone calls from the IVA firm encouraging you to sign up. Non-IVA cases are just dropped. From the debt packager’s point of view, they are not wasting their time on unsuitable clients.
These firms are parasites on the debt advice process, with no real interest in the outcomes for their clients, only for their own profits.
Regulatory changes being discussed in 2021
FCA wants to ban referral fees for debt packagers
Most of the IVA market is currently outside of the FCA’s control. It looks as though about 20% of IVAs may originally start with a lead from an FCA-authorised debt packager. And few of the firms that set up IVAs are FCA-authorised.
The only immediate step the FCA can take to halt mis-selling is by changing how its authorised firms behave. The FCA has previously told debt packagers to improve the quality of their debt advice and in July 2021 it took supervisory action against five firms that led to them closing down.
But supervisory action against individual firms is a slow approach to halting harm when it is so widespread and when there are such large financial incentives for new firms to enter this business.
Instead the FCA has decided to go for the nuclear option – it is now proposing to ban debt packagers from making fees by IVA referrals. This isn’t just hoping to change their behavior – it removes the reasons for these firms to exist.
The FCA is clear that this is what it wants to happen:
We are proposing new rules which ban debt packagers from receiving remuneration from debt solution providers. We consider that addressing the remuneration model which drives non-compliance is the most effective way of delivering the appropriate degree of protection for consumers. This would end the debt packager model.
The short consultation has ended. The FCA has said that it is proposing to introduce the new rules within a month, subject to the outcome of the consultation.
Insolvency Service proposing to overhaul IP regulation
On 21 December, the IS announced a major consultation on Insolvency Practioner (IP) regulation. Much of the discussion about this is focussed on corporate insolvency – when firms go bust – but it will also help give better regulation for personal insolvency – bankruptcy, DROs and IVAs.
Getting rid of the current multiple regulators of IPs is sensible – the system has no real benefits and is confusing for consumers. Changing so that the firms themselves are regulated, not just the IPs, is long overdue – the current system is archaic.
Introducing a system that can deliver compensation when an IVA has been mis-sold will encourage people to make complaints – at present there is little point. And it won’t just help the customers affected, it will also provide a financial incentive for IVA firms to clean up their act.
The IS Chief Executive said in June 2021:
Ministers have also agreed that we should undertake a holistic review of personal insolvency framework.
I think it will be good to have a review of how all the parts of personal insolvency fit together. But I hope that urgently needed changes to help prevent IVA mis-selling do not have to wait for this.
The changes to the IVA Protocol this summer seemed to me to be largely ineffective.
It would be a major improvement if the IS (through the current RPBs) was to introduce mirror proposals to the FCA’s ban on fees being paid to debt packagers. This would put the unregulated IVA lead generators out of business.
I also think the FCA, IS and the Treasury should work together to introduce clarity on where people giving debt advice should have to be FCA authorised.
A simple approach would be to say that if it looks to a potential customer as though they are being given expert help from a debt adviser, that needs to be classified as advice and FCA authorisation should be required. This may involve changes to the FCA’s PERG rules and the Treasury reviewing the exemption for IPs from the need for FCA authorisation.
UPDATES
2022 – Insolvency Service consults on insolvency framework
In July 2022, the Insolvency Service issued a Call For Evidence, asking a wide range of questions about personal insolvency. My response to this consultation is here.
2023 – Debt packager ban finally to be introduced
In June 2023, the FCA at last announced the ban on debt packagers would come into force in October 2023. Nearly two years after it was first proposed. During this time it is likely that thousands of people may have been given poor advice to enter an IVA.
A scam email to scare you into an IVA
More than a third of IVAs fail
Change from an IVA to a DRO?
Tim Harness says
Thanks for your work on this Sarah and your good advice throughout the year, I’m sure it is much appreciated
Alan says
Is there a date for this to be completed by?
Sara (Debt Camel) says
The FCA’s proposal to ban fees for debt packagers? The consultation closed a couple of days ago. Unless that turns up something that makes them thing again (and I think they knew EXACTLY what they were doing) they said the rules could be live within a month. So end Feb?
Malcolm Hurlston CBE says
Your approach is absolutely spot on. There is no time for delay. I would like to individual practitioners’ records to be in the public domain.
John mccormack says
Hi Sarah I have had many failed IVA clients in the past 10 years these clients should never have entered into the IVA and they quickly completed a DRO. Most recently (2 in past month) has been clients who are told they must (no choice) use their PIP payments to pay creditors. There is no mention what happens if they lose PIP or that the PIP payment in a DRO can be discounted as it is given for personal needs related to their disability. Anyone else seen this?
Sara (Debt Camel) says
Unfortunately that isn’t that unusual. To many IPs it seems that disability benefits are just more income.
I don’t think disability benefits should be treated as income in an IVA (or if they are, there should also be a matching allowance for care costs, as in a DRO/bankruptcy). The only exception is where the client has a house with equity and using the disability benefits in an IVA is the only way to clear a lot on unsecured debt. That is rare…
Kevin says
Hello John , yes I have seen lots of IVAs ( volume providers) where they do NOT offset the PIP payment , the proposal states that the consumer wants to use this income to pay creditors.
However the consumer has not agreed that or was aware it was in the proposal. !
That is how the IVA firms get round it , very wrong and unfair
Nick says
I really need help, thanks for this btw. I have an Iva set up by the insolvency group and I really think after reading this I was totally mis-sold and felt pressured in to doing it also advised to lie about parts on my income and expenditures to “help” my case when it was presented to the insolvency practitioner. I’m in a bit of a pickle at the moment because I’m spperntly in breach of the agreement but I have no idea what I’m in breach of and apparently the only option is to extend it. I really need to speak to someone about this. I was promised that an Iva would solve my debt problems but it’s kinda added to it and I still have creditors after me. Once again thanks for the article as I felt that something ain’t right with this and that I was duped in to helping someone hit their sales target or something.
Sara (Debt Camel) says
Very sorry to hear this.
Can you give some details – when did your IVA start?
Are you buying or renting? How much are you supposed to be paying every month?
Has your income gone up, is that why they say you now have to pay more?
Also the creditors that are still chasing you – were those debts included in your IVA?
Kevin says
IVA mis selling is now massive , if you were told to lie then that’s the mis sell , your IP (nominee ) had a duty to make sure everything is correct and you understood the IVA , which by the sound of it you do not.
Julie says
Hi,we entered into an iva in 2015 after
An initial meeting was set up with a debt consolidation advisor, ( after visiting our local citizens advice bureau…)
Our main concern was that we obviously didn’t want to lose our home ( it’s still mortgaged )
We had quite a large debt and the iva seemed the best way for us.
Although our buisness was sold on ( if that’s the right meaning ) from grant Thornton to aperture then to debt solutions…we’ve not had any problems as such apart from having to extend to 6yrs as we had no way of taking equity out of our house.
When we finally abided by our iva commitments earlier this year..
Only problem now is I don’t really know what we have to do if anything by building up our credit rating ( not that we now require credit though)
Sara (Debt Camel) says
I have an article on how to do this: see https://debtcamel.co.uk/repair-credit-record-iva/
Gary says
I have been working in debt advice for too long, many IVA claimants I come across have been wrongly advised to apply for an IVA instead of a DRO.
I would say over 85% of IVA’s that I come across are incorrect, I can not remember the last IVA I have come across which was correct.
Cee says
Over the past 20 years I’ve worked at a major debt charity, I’ve also worked for an IVA packager and for also directly for Insolvency firms. I think debt charities funded by the creditors are not great. It’s clear the advice given in many cases is shaped by a criteria that favours generously towards lenders who heavily fund them. I’ve spoken to thousands over the years many spoke to Stepchange & were told they did not qualify for a DRO. I’ve advised them to apply for a DRO again elsewhere and upon a follow up call they were accepted. This happens far too often for it to be a one off. In my opinion, close down IVA packagers & stop allowing creditors to directly fund debt charities to remove the very clear bias as they are not impartial. All debt advice should be via a government funding, perhaps via a levy paid by the lenders but not directly. Its funny how so many are refused a DRO by stepchange but are then approved elsewhere – same client, same circumstances. The problem is much bigger than just packagers, but it’s a start.
Dawn Reed says
I looked into an IVA about 7 years ago.
We hit financial crisis in 2008 when our 1st child was born and our plans on how to deal with our debt were now impossible. I had been on token payment plan arranged with advice from Citizens Advice. A few years in, I sort further advice from a Community Money Advice debt advisor, as the amount of debt was adding to my mental health problem. He reviewed our income and expenditure with me and discussed IVA being a possible option to explore, so we decided to look at a the option, with my DA present. The representative looked at my CFS (as it was then) and moved lots of things about and suddenly had created a disposable income of £100 and was adamant that an IVA was the best option.
I did not understand how he had magicked up this £100 that was not there and nor did my debt advisor, so I dismissed the guy, but he kept pressuring and contacting myself and my DA to go down this route.
It would not have been the right option for us and I am so pleased I knew my finances well enough to know I did not have £100/m to pay an IVA. Thankfully I became debt free 2 years ago, but it was a long journey. And I have been working as a Debt Adviser at a Community Money Advice centre for the last 7 years. We have not had one client who an IVA has been the right option for!
Sara (Debt Camel) says
IVAs are great options for a small number of people with problem debts who have assets to protect, some disposable income and relatively stable finances. That does indeed rule out most clients!
Tracey says
I was missing sold a iva they said and used my housing benefit and disability to work benefit too as extra income but stepchange have recommended. A dro as no husband no family no friends no support alone now I have bailiffs calling and I have to wait for a termination. Letter from i v a it was only at propsal stage only 2weeks in
A says
I’m currently in an IVA, I have roughly a year and a half left, I’ve paid £7k into it, even though they said I’d only pay £6k. I believe I was mis-sold, mis-led and manipulated from the start. I told them I’d built up the debt due to a serious gambling problem, they said they could help and “don’t worry, we can hide you gambling transactions from your statementSurname in order to get you accepted”. They manipulated my outgoings and my bank statement. I made a complaint over a year ago, they agreed to lower my payments. But now I’m thinking about using a solicitor to make a claim against them. Any advice on this would be most appreciated. Thank you.
Sara (Debt Camel) says
I am not convinced that solicitors are getting many good results. Most ask for an up front fee (possibly payable in monthly installments) to write you a “report”. That may back up your case and look lovely but it may not help you in getting any redress. When solicitors know they will win a lot of cases they usually start taking them on a “no win, no fee” basis – that doesn’t seem to be happening here.
I have sent you an email.
Issy says
Hi Sara I’ve finally received my termination letter and breakdown after asking my Iva to fail , is it normal that that have taken £3990 in fees ? , I was never told about this in the beginning, I was expecting maybe £1500 -£2000 but seriously, they’ve paid nearly as much to themselves and some of the items they have listed is a bit shocking , any advice ?
Sara (Debt Camel) says
IVA fees are often that much I am afraid – and they are mostly charged in the first couple of years, so your IVA firm hasn’t lost out by your IVA failing :(
Too many are rip off merchants, some of the itemised fees can be eye-watering.
But what matters now is you getting on with a DRO. Who are you talking to about this?
Issy says
Hi Sara , I’m no longer in my Iva , a creditor has told me they are refunding payments made by the Iva as the debt was write off but they have to return to them for data breach , and they were made by them on my behalf obviously, do the Iva now need to send the funds to me ? Surely they cannot keep them ?
Sara (Debt Camel) says
i don’t know, you can ask, they may distribute them to other creditors.
Are you making progress with a DRO?
Darren says
Have a IVA only running for a year but struggled to pay the £50 each months now my fuel bill has gone up by £40 rent by £50 and food fuel by around £30 so wipping out anything i had spare to pay my iva
my total debts are around £13.000 are joint wages cover the bills but nothing spare for my iva
also have a car loan and the car is only worth around £2000 max more than the loan and need my car for work i suffer from depression and anxiety and was diagnosed with learning difficulties
so dont know what to do anymore
Sara (Debt Camel) says
I suggest you talk to National Debtline on 0808 808 4000 about whether you may be eligible for a Debt Relief Order or what your other options are.
Clare says
Hi Sara, in 2010 I went into an IVA and was told by Debt Free Direct it would be the best thing to do. I struggled through the 5 years to pay the monthly payment of 450 a month and it also had to be reduced through the arrangement. I paid 40k back of debt and now finished and off my records. Is there anyway you can complain about going into an IVA as I still think I should of never gone into it. I had no assets as my boyfriend owns the house but I’m sure I should of declared bankruptcy. Can you complain about being mis sold an IVA? Hope you can help.
Sara (Debt Camel) says
I suspect in this case there is nothing that can be done as it is so old.
DFD went into administration in 2017 and open IVAs were sold to Aperture. I don’t know if Aperature would have any details of your IVA which had already been completed for over a year. even if they did, it would be hard to establish mis-selling and Aperture may have no liability for it.
Karen says
Hello Sara I’m asking this question again as I can’t find where I posted it previously so apologies.
My 18 yo son was accepted for 2 creation accounts within a year running parallel. He purchased entertainment goods. He was not in employment at the time of credit being given and has defaulted. Is it worth making an affordability claim?
Sara (Debt Camel) says
it was here: https://debtcamel.co.uk/no-calls-or-letters-about-debt/comment-page-3/#comment-483868
James says
Hi, I have now completed my IVA and received the completion certificate, I have discovered that one debt wasn’t included in the IVA, this lender was told about my IVA at the time however I assume they never made contact with the company dealing with my IVA, that company advised me that any debs BEFORE the IVA date that it came into force are automatically included and that now my IVA is finished, I do not owe them money? Is this correct, can I tell that company that they didn’t contact my IVA company even though they knew about it and also the debt is before the IVA day of set up? Please advise
Sara (Debt Camel) says
this lender was told about my IVA at the time
who told them, you or the IVA firm?
that company advised me that any debts BEFORE the IVA date that it came into force are automatically included
That is wrong in one important detail. Any debts that were included in your IVA are cleared, any debts that weren’t are not, unless you arranged to have them included later.
So was this debt listed in the the debts going into your IVA?
James says
Hi thank you for replying, I informed them myself and they wrote to me confirming they knew about the IVA, it wasn’t in my list of debts that are now completed following the Iva completion – does this mean I still owe this firm the money? Can I go back to the Iva people and get it included or is it too late in which case am I better off making an offer to the creditor to settle the debt at a reduced rate if they accept?
Sara (Debt Camel) says
You need to ask your IVA firm if it was included in your IVA, and if not, why not if you had told them about it.
James says
Hi
I don’t believe I did tell my IVA firm, I just know the lender wrote to me and said they would contact the IVA firm so I assumed they had, if this isn’t the case wouldn’t a complaint to the ombudsman help? Surely they have a responsibility to contact my IVA firm as they said they would? Where do I stand with the debt with them? Now the IVA is completed and I have my certificate can they still be added onto it?
Sara (Debt Camel) says
That isn’t the way an IVA works – you tell your IVA firms what your debts are, they are listed in your IVA and the IVA firm informs the creditors.
However as you have the letter from your creditor saying they will contact the IVA firm, you now need to ask the IVA firm if they ever did. If the IVA firm says No, go back to the lender and say it is unreasonable of them to ask you to pay this debt when they failed to contact your IVA firm – ask them to write the debt off. Attach the letter as evidence.
James says
Thank you Sara,
Can I just confirm then, if they don’t agree to write off the debt, can I complain to the ombudsman? Just want to understand where I can go after if they refuse to write off the debt
Sara (Debt Camel) says
So double checking this…
Re-read the letter. Does it say they will contact your IVA firm? or does it say they will talk to your IVA firm when they are contacted? what is the exact wording?
James says
The wrote to me and said they are fully aware I’m in an IVA and that they know the company dealing with my IVA ( not sure if I can mention them ) they say there’s a department working on their behalf who will deal with them directly – they ask me to confirm this is correct that I’m on the insolvency register and I emailed them and said yes I am and that the information they have is correct
Sara (Debt Camel) says
Ok so letter from them was AFTER the IVA started? How long after?
Why was the debt not listed in your IVA?
Have you asked your IVA firm if they were ever contacted and if they were, what they said?
Sam says
Wish I’d never entered into an IVA it was the worst decision of my life. To begin with it sounded helpful as I was on minimum wage and struggling, they offered to turn my £12000 debt to £4800 with 60 payments at £80pm. Then, as luck would have it within a couple of months I got a promotion at work and my payments became £180pm, then on my next review it became £200pm. Now, another review is due and I’m on even more money so no doubt they’ll want more off me, but, even though my original debt was £12000, they recently told me my expected contribution is £13600 and I have paid £6200 so far, so I am paying more than my original debt because of the IVA fees. I feel proper shafted by them, I could have carried on paying my debts, I’d have had no defaults or IVA against my credit. I’m now trying to offer them a full and final settlement of £4000 that my mother is gifting me, but they say it’s too low. £4000 on top of the £6200 I’ve already given them makes £10200, which compared to my original £12000 is not a bad offer, but because the IVA need such a big piece of pie it seems unlikely my offer shall be accepted. I detest them, they have ruined my credit and I feel like they’re ruining my life.
Sara (Debt Camel) says
the next review should take into account all the increases in your expenses this year – higher energy bills (and the further 50% they are expected to go up in October), petrol if you drive, food prices, broadband, mobiles etc. Make a list of EVERYTHING that has gone up and your payments should be reduced by that even if they are increased for higher wages.
How much were you struggling at the start? Could you have managed to continue just repaying the minimums? I have heard some strange stories about people being encourage to increase their expenses or decrease their income on IVA applications in order to get them approved – did this happen to you?
Janis says
Hello, Thank you in advance for your help. I have a mortgage that was due to be repaid by equity release back in the first year of covid. I was due to retire but covid changed everything and put us in debt, long story short, still working, and still clearing the debts (about £10K) The mortgage is still outstanding, equity release lenders people got the wind-up when they discovered the IVA I arranged in the meantime. The IVA people were aware that I was doing this equity release and advised I would have to use some of that money to pay off the IVA. OK, that should not be a problem. The IVA people did not adequately advise me that there would be a problem if I went ahead, had I known it would cause problems I would not have gone ahead with it. But the mortgage people do not seem to want to consider a client with an IVA. I believe the IVA was miss-sold, and it has put me in a very difficult position. Worried and concerned.
Sara (Debt Camel) says
Why did you take out an IVA if you were about to get equity release which would allow you to settle the debts? I’m asking to find out if an IVA was at all a sensible option for you.
Do you have anything in writing from your IVA firm which mentions the equity release?
Denise says
As a result of irresponsible lending I have now been entered into an IVA over a year ago (2021). Due to irresponsible lending by the creditors, I felt there was no way out other than to seek the debt advice in the first place – The Insolvency company advised me that an IVA was the perfect solution. I now know that it was not and whole heartedly regret getting into the IVA. Even though I was paying all the creditors on time it was causing me so much financial hardship. I am currently dealing with a Solicitors firm in relation to the mis-selling of the IVA of which they advise I have a good case to win. With that said, I am considering also making the irresponsible lending claim to the creditors as I believe that they not only lent me credit irresponsibility but also that they took disproportionate action to recover the debt by taking part in the IVA creditor meeting to approve the IVA without having fully explored any other solutions/options with me first such as debt management plans etc. If I make an irresponsible lending claim and it is upheld by some or all of the creditors and I can also prove that I was mis-sold the IVA as a result, then do I have grounds to show that I have been placed in a worse position than before I started and therefore have the IVA and the defaults should be removed from my credit file and potentially even have the debt written off?
Sara (Debt Camel) says
what course of action do your solicitors propose and what timescale do they expect until there is a result on the mis-selling?
my concern about you pursuing affordability claims now is that if you win, the money will simply be paid into your IVA.
also that they took disproportionate action to recover the debt by taking part in the IVA creditor meeting to approve the IVA without having fully explored any other solutions/options with me first such as debt management plans
It seems to me to be unlikely that you could win that. A lender does not have a duty to propose alternative debt solutions to it – indeed all a lender could do is refer you to a debt adviser if you asked about alternative debt solutions. A lender is not authorised to give you advice on this.
If I make an irresponsible lending claim and it is upheld by some or all of the creditors and I can also prove that I was mis-sold the IVA as a result,
I don’t see how you can prove the second part of that sentence. Who do you think you could complain to about that?
In what way do you think you were missold an IVA and what should the correct debt solution have been – a DMP?
Did your IVA firm, or any firm you first spoke to, encourage you to mis-state your income or expenses?
Denise says
Thanks Sara,
I don’t want to divulge what course of action they are taking in this forum as the case is ongoing so I don’t want to jeopardise anything but they assure me having looked through everything that is it a very good case for a win given the issues and mis-selling criteria that they have assessed this against and this doesn’t include any irresponsible lending.
The irresponsible lending is an something I wanted to investigate and get advice for separately tho the IVA mis-selling because that was where it all started and this resulted in the IVA.
Thank you for your advice in relation to the irresponsible lending claim and that this could be eaten up by the IVA – I have no issues with the refund going back directly to the debt as long as the amount does in fact go direct to my creditors and is removed from the balance owing instead of being eaten up into the thousands of pounds worth of fees that the insolvency company take first before the creditors even see a penny!
Denise says
Please also note that the lenders did not ever offer me any debt management advice because to them all of my monthly repayments were made on time – buy that doesn’t mean I wasn’t in financial hardship desperately trying to meet those repayments. I did advise them that it was becoming untenable to repay what they wanted but they did even want to offer me other options hence the need to seek further advice which resulted in the IVA :-(
Sara (Debt Camel) says
oh the IVA firm will take its cut off any affordability payments.
Kelly says
Hi Sara,
You’re sure is always a source of trusting information for me, I had a question,
I am in an IVA with CF since 2019, it was taken out during a breakdown and not only did I not understand what I was signing up for due to illness but I also didn’t receive a contract, only something digital over text with “hurry you need to sign quickly to get the deal” in the wording, from email’s I’ve found from the start and since then CF have been horrific with customer service including signing me up for another year of payments, from reading up I know I was poorly advised and missold the IVA, but what happen’s after I put in a formal complaint with them followed by the insolvency service? Do I then have to find another debt solution for the remainder of the debt? Will that start the 6years on my credit file all over again? I’ve asked them twice for a copy of my contract as all I received was confirmation I was in with a list of my debt companies but as usual have been ignored, I also asked for a copy of their complaints procedure and after sending a chasing email, received a reply asking why.
Dealing with the company exasperated my mental health conditions but I wonder if I’m better off holding on for the remaining 42 months and hope they don’t take any more money off me monthly than they currently do.
Sara (Debt Camel) says
Can you give some details please…
How large are the debts in your IVA?
Are you buying or renting?
Do you have any assets to protect in an IVA?
What are your current monthly payments? Have these increased sinse the IVA started?
Are they affordable at the moment and are you worried about what will happen if energy bills go up?
It sounds like a 6 year IVA?
Kelly says
Hi Sara,
Debt total started at £23,544, I’ve paid £5375 to date since July 2019, most of that has been their fee’s, they say I have £9511 still to go over the next 43 months.
I rent, no assets at all, initial payment was £139 a month, then £165, then £139 then £165 again because they change my outgoing amounts, then in 2022 sent an email saying because of the cost for living crisis they would lower it to £94, without even a review of my finances but would extend the IVA time, I declined, said I would carry on making the £165 payments, they said they would change it back to £165, then weeks went by I chased and chased, they did nothing, finally they took my request to my creditors to go back to the £165 a month over less time and they declined it.
So it’s now a 6 yr and 3 month IVA, I could just afford the £165 payments, it would be hard to jump back up now as the extra moneys been swallowed by electric, I have no contract, Theyve ignored 3 requests for a copy, I want to log a miss-selling of the IVA to me when I was in mental health crisis and for the mismanagement throughout, if it’s put as misssold will it mean I’m clear from credit fix & I need to make arrangements with my creditors myself? I know the IVA will remain on my credit file, it’s the only reason I’ve not just cancelled the IVA and taken out a debt relief order because I’ll lose another 3 years having that on my file when I want to be able to get a mortgage with my partner.
Sara (Debt Camel) says
There is no set procedure for what happens if an IVA is found to be mis-sold. or for getting any compensation for mismanagement of an IVA.
If the IVA fails, then you are left back with your debts. This would be the full amount of your debts less payments made to the creditors, not the 9k CF say remains – that 9k is only if your IVA completes. Even if CF agree to take no fees, this would be c £17,000. If you are struggling to pay £165 at the moment, I don’t see how you have a hope of repaying that.
It may not be easy to prove that the IVA was mis-sold, despite evidence about your mental health. This case cannot have been eligible for a DRO in 2019 as at that point the DRO limit on debts was a maximum of 20k. You can try to argue that you should have been advised to go bankrupt.
does you partner have debts? Any savings?
Kelly says
Hi Sara, thank you for your insight, he doesn’t have debts but has offered to ‘gift’ me the remaining amount left to pay CF, about £4.5k to finish the IVA early to get me away from the company as they have a large impact on my mental health with the chasing etc I have to do, this is why I asked for a copy of my contract to see what the process was to pay it off early but still waiting for their response, I’ve read that in general you make and offer which the company takes to your creditors who then either accept or decline it, then you pay it along with outstanding fees and they submit a document to say you are out of your Iva (although still on your credit file) I hope this is possible with CF and that they don’t throw in any spanner’s but I won’t know until they send me a copy.
Sara (Debt Camel) says
There is nothing in an IVA contract about the process to finish it early. You have to make an offer which CF will put to your creditors, see https://debtcamel.co.uk/iva-settlement/
Chris says
I entered into an IVA in Dec 2016 with Johnson Geddes. I was in around 8K worth of debt with payday loans (most of those I was missold also which I have put in affordability complaints for in the past). On the call, the adviser said this is a perfect solution for me and my payments would be £80 a month for 5 years. There was no discussion about other alternative debt solutions and I felt desperate so signed up.
After a year (I changed jobs in this time) they upped my payments to around £150 per month but then said I had under paid from the year before so it increased further to around £225. It wasn’t long before I was struggling with the repayments and this can be proven by missed Monthly IVA repayments (which I got charged for). I also raised my concerns about these increases and told them on the phone I felt like I was miss sold the IVA. I even asked them to pull the call I had with the first agent but they said they don’t have it.
I didn’t see any alternative being a year in so stuck it out the best I could. Fast forward to July 2022 and my IVA was deemed completed after I asked JG to contact my creditors to cancel the rest of the outstanding debt (they didn’t want to do this but I was persistent in asking them). Do I have grounds to make a complaint about being miss-sold the IVA and receiving any compensation?
Sara (Debt Camel) says
It is a pity you did not pursue this in 2017/18 if you thought then it was mis-sold.
And it sounds as though your later payments were set too high and you could have challenged those.
What so you think your better option would have been in 2016?
Chris says
I did complain over the phone when they said they need to do a review and the payments would go up after year 1 but they just dismissed it and said that wouldn’t have happened. I asked for the call recording but they said they don’t record all calls and won’t have it. I was made to feel like I either paid what they say or I will be in breach of the terms and then I would be chased for the debt again which I thought would have been really bad as I had been in the IVA for 1 year and the loan companies would have pushed for there money which I obviously didn’t have.
In terms of better options I’m not 100% but I didn’t have any assets so maybe DRO, DMP, Debt consolidation.
Sara (Debt Camel) says
Do you feel the £80 was affordable at the start?
Chris says
Yes. I did feel that was affordable just about. The increase after the first year though plus the additional for not paying enough in year one made it extremely difficult hence why I missed so many payments
Sara (Debt Camel) says
In that case it is unlikely you would have qualified for a DRO.
A DMP would have been better with hindsight because of your pay rises, but at the start you were getting what looked like a decent about written off your debts.
Consolidation – it would have been at a horrible rate if your credit record was so bad you had to get payday loans.
There is no clear route to “claim compensation” for a mis-sold IVA. If it is recent, then getting it ended is often the best option. But for already completed IVAs, I think there has to be a VERY strong case, not just a feeling that an IVA wasn’t a great options for you so you should have had better advice.
Roger says
I was sold an IVA by Creditfix even though I was a pensioner on pension credit and housing benefit. I was not told of other options or the £90 I could pay and be clear. I have no assets to protect. I struggled to pay for 5 years and finished in April 2023.
Sara (Debt Camel) says
I am sorry to hear that. Your other options including bankruptcy should have been explained. How much were you paying a month and how large were the debts that went into the IVA?