On 30 April the Insolvency Service published the personal insolvency statistics for the first quarter of 2019.
Comparing this quarter to the last quarter of 2018:
- bankruptcy and DRO numbers were about the same;
- IVA numbers dropped from 22,943 in Q4 2018 to 20,325 in Q1 2019.
The upward trend of IVAs continues
It is a mistake to make too much of this fall in IVA numbers, because the overall trend is still up.
Q3 and Q4 IVA numbers last year were both very odd, as the following graph show.:
The detailed figures for the last 5 quarters are here:
The numbers in pink show the odd 2 quarters: Q3 IVA numbers were way down, Q4 numbers sky high.
And there was no significant change in DROs or bankruptcies in those two quarters, so this seemed to be a purely IVA oddity, not related to any change in the wider economy and people more or less likely to choose insolvency.
In IVAs in 2018 – numbers jump and so do failure rates, I speculated:
It looks to me as though some IVAs that would normally have gone through in Q3 were for some reason delayed until Q4, giving a big bulge at the end of the year.
One explanation for this could be the reports on some IVA forums during the summer that one of the big IVA firms was having a lot of its creditor meetings to accept IVA proposals adjourned or postponed because of “paperwork problems”, which were never clearly identified. These stories dried up during the autumn. If this had affected several thousand IVAs, which were approved a few months later, that could account for the Q3 and the Q4 statistics.
I think the new Q1 IVA statistics show this was probably a correct interpretation.
IVA numbers have now returned to where they would have been if IVAs had gone up steadily by about a thousand a quarter for the last 5 quarters: 16,400 – 17,400 – 18,400 – 19,400 – 20,400.
Back to the old question – why are IVA numbers rising?
Why should IVAs have gone up 24% this quarter from the same quarter last year? At a time when bankruptcies are flat and DROs have only gone up 7%?
For two years now I have been saying that IVA numbers have been rising much faster than the other forms of personal insolvency because significant numbers of IVAs are being mis-sold to people who would have been better advised to choose a DRO or bankruptcy.
The fact that the January statistics showed IVA failure rates in the early years are also increasing supports this suggestion – someone who should have had a DRO is very likely to struggle in an IVA.
In September last year the Insolvency Service’s Review of the monitoring and regulation of insolvency practitioners report picked up many points on this area. The FCA’s Dear CEO letter to Debt Packagers a few weeks later addressed the allied problem of ensuring that customers who were referred to IVA firms had been given good advice on their options.
But neither of these useful-sounding reports seems to have made any difference so far. The Insolvency Service and the FCA need to be concerned and see what practical actions they can take.