Consumers warned over mis-sold IVAs

IVAs, in which between 40 per cent and 80 per cent of a person’s possessions are recouped to recover as much of the debt as possible, are an alternative to bankruptcy.

However, widespread concern has been expressed that profit-seeking companies convince consumers to take out IVAs when bankruptcy may be a better option.

“Cases have been drawn to our attention this year in which IVAs have been recommended to debtors whose only available source of finance was unemployment or disability benefits and who, in our view, could not reasonably have been expected to meet the payments required,” the Insolvency Practices Council reports.

“We think that some unintentional mis-selling may be occuring where IVA providers fail to see the debtor face-to-face. Without a meeting, debtors may not understand what they are committing to as well as they should,” says ClearDebt chief executive officer David Mond.

He continues: “Face-to-face meetings are, ClearDebt believes, more likely to ensure people know what they are getting into – and we feel they weed out some who are not prepared to take the IVA seriously too – and this may also mean fewer IVAs fail.”

Britain’s debt now exceeds £1 trillion, a significant growth which has prompted legislation in Parliament to protect credit card consumers and highlighted the importance of the effective management of loans, overdrafts and mortgages.