15,000 people are being asked by Creditfix to agree to a variation that will increase the fees Creditfix gets from 15% to 23%. These are the Knightsbridge customers whose IVAs have recently been sold to Creditfix,
If you have had one of these emails, do you have to agree? What are the pros and cons?
IVA fees do matter
Creditfix has said in the email about the proposed variation:
The adjustment does not affect your monthly contribution. The cost is borne by your Creditors and reflects increasing costs of administration.
It is true this increase won’t change your monthly payment. But there are three situations in which you are affected by how large the IVA fees are:
- if you have a joint debt in your IVA and your partner doesn’t have an IVA, then higher fees mean that less of this joint debt is repaid by your IVA payments so your partner has to pay more. For most people this is irrelevant or would be a fairly small amount;
- if your IVA fails, then you are left owing your debts plus the IVA fees, less the amount you paid in. So if the fees are higher, you are left owing more money. About a quarter of IVAs fail, so this affects a lot of people;
- if you pay off your IVA in full, paying all of your debts, perhaps because you have an inheritance, a redundancy payout, sell the house or large PPI refunds, then you are the one that pays the IVA fees, not your creditors.
And there is another case where you may be affected by higher fees. If you want to settle your IVA early because you are struggling, your creditors may want a larger settlement because higher fees mean they get less. This is less definite than the other three situations, as the decision to accept an early settlement is based on each individual case.
What are the pros and cons?
The advantages of agreeing to the variation
The proposed variation includes the removal of any minimum dividend clause. This sort of clause is very unusual. If you have one, then deleting the clause would be good. If you aren’t sure, ask Creditfix to tell you, including sending you a copy of the minimum dividend clause.
I can’t see any advantages for the large majority of ex Knightsbridge clients. When Creditfix did a similar variation a few years ago, they offered to let the customers keep some PPI refunds, but I don’t think there is an incentive being offered to Knightsbridge customers.
Higher fees are a disadvantage – and they will affect people near the start of their IVA more
If your IVA is in the last few months, you can be pretty sure it’s not going to fail, and it’s unlikely that you will get a sudden windfall. So you may decide you don’t care about the proposed change and you are happy to sign.
But if you are at the beginning of your IVA, then it’s much more likely that either your IVA will fail or you will repay it in full, and then the higher fees are much more likely to matter to you.
The other changes in the proposed variation seem minor and I don’t think many people will be worried about them.
Do you have to agree to the variation?
I have seen some comments on forums saying that some people have been told by Creditfix that they have to sign or they are in breach of their IVA and it may fail.
UPDATE I have been told by Creditfix that that is incorrect, that they won’t propose any variation without the client’s agreement and that no-one should be told their IVA will be terminated if they don’t agree, which could never happen. Their customer service team manager has today reminded all of this team that this is definitely not the case.
That’s good news.
I can’t say if you should agree to the variation. That may depend on the terms of your IVA and the details of your own financial situation. If you want advice, go to your local Citizens Advice or a Law Centre.