Against wider predictions that there would be a significant rise in IVA’s during the fourth quarter of 2006, ClearDebt believes that the very low growth in the quarter is due not to a lower level of personal debt, but to the well publicised discussions between some of the IVA providers and institutional creditors.
ClearDebt believes that this situation, where creditors have demanded that IVA providers return more to creditors by reducing their fees or face the situation where their IVAs are refused has led to lower acceptances and a backlog of IVAs that will possibly impact during first quarter of 2007, when it is hoped that the industry will see a compromise between all the major players.
After consultation between the Insolvency Service, British Bankers Association and the majority of the IVA providers, and the newly formed Debt Resolution Forum, it is hoped that a compromise will emerge. Creditors will acknowledge that IVAs often provide the best possible solution to personal insolvency and in return IVA providers may spread some of their costs over the life of the IVA, thereby guaranteeing the creditor an earlier income and sharing the risk of IVA failure.
ClearDebt is not affected operationally by this conflict, as due to its unique operating model, it currently is the lowest cost AIM listed IVA provider and has yet to be failed by creditors on the basis of fees. This is not the case with the wider market, which operates with considerably higher overheads due to inflexible business models.
David Mond, CEO of ClearDebt commented:
“These figures are a direct result of the current conflict between the IVA industry and creditors. There has to be a solution found quickly – banks and the credit card providers need to remove artificial hurdles and approve IVAs on the basis of appropriateness and affordability and IVA providers must lower their fees, or face the prospect of alienating creditors.
ClearDebt is not directly affected by this situation as our flexible operating model allows us to be amongst the lowest charging, and with our unique IVA insurance also making us the safest option for creditors. We have not been denied an IVA on price by creditors in 18 months trading. We are however part of the wider industry, and through the Debt Resolution Forum look to take a leading role in the negotiations necessary to find a compromise.
We should not forget that debtors are the real victims of this. We believe that there was actually a considerable rise in personal insolvencies, which will be illustrated by a rise in Q1 2007. These cases cannot be held in stasis indefinitely. The UK economy needs creditors to recognise that IVAs are fair to banks, credit card providers and to debtors and the IVA industry needs to recognise that creditors require value for money.”
For further information, please contact
David Mond, CEO, ClearDebt Group PLC
Andrew Smith, Director, ClearDebt Group PLC
Paddy Blewer, College Hill Associates
