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IVAs To Be Better Regulated

IVAs To Be Better Regulated


    

IVAs To Be Better Regulated

by Davis Merriweather

There will be a new governing code for Individual Voluntary Arrangements starting this year. The UK Insolvency Service has said that the new practices, which have been agree to by the industry, will make the IVA process more clear to the average citizen.

In the past certain IVA companies have been criticised for the way that they have marketed their services. Consumer groups, who felt that IVA providers have mislead consumers in the past, are generally pleased with the new code of conduct introduced recently.

An IVA is a legally binding agreement between a debtor and a creditor whereby the creditor agrees to write off a certain percentage of debt. In return, the debtor agrees to pay off a specific amount of money every month to the creditor. IVAs are available to people in Wales and England but not Scotland. In Scotland they have a similar debt solution known as a Protected Trust Deed (PTD). IVAs tend to last 5 years but in certain situations the debtor can pay that off sooner or even extend the payment periods.

The government introduced IVAs as a way to avoid bankruptcies for small businesses that had taken on a lot of debt, but IVAs grew popular among individuals in recent years.

There were around 5,000 IVAs in the United Kingdom in 1998 but that number grew to an estimated 45,000 in 2006. Although popularity for this debt solution decreased in 2008 its expected that the numbers have risen in 2009 and into 2010.

As IVAs became more popular, companies started popping up across the offering the arrangements. Many debt advisers and consumer groups felt that the marketing of the IVAs was not done in an impartial way.

The Office of Fair Trading (OFT) questioned some IVA companies in 2007 about the way they were marketing IVAs to the public. The OFT, said that some of these companies were trying to mislead people. There was a major concern among government officials and consumer rights groups that IVAs were being sold to people that didn't really need them.

The new regulations were put together with the help of IVA providers as well as the UK's Insolvency Service.

The minister responsible for the protocols, Pat McFadden said that they hoped this would create greater transparency in the IVA community. McFadden went on to say that the new code of conduct was a significant achievement for all involved.

A representative from the British Bankers' Association (BBA) said that these new protocols would help restore the country's faith in IVAs. The BBA said that from now on they hoped an IVA would only be proposed if it were the best possible solution for the debtor.

All three groups involved in the new code of conduct had to work in unison but McFadden said they all made compromises to ensure things worked in the favour of the debtor. We shall see how these practices work out in the UK debt market.

The UK Insolvency Service plans to closely monitor IVA companies in the coming year to see how these changes effect their business practice. A representative from the group said that they were hopeful that this would be of the greater good for the UK consumer.

About the Author:
Want to find out more about IVAs, then visit Davis Merriweather's site on how to choose the best debt solution for your needs.


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