Watchdog warns against false IVA claims

June 12, 2008 | posted by Pam Atherton in Banking, Loans, Mortgages | comments (0)

It must be a sign of the times. As though the soaring number of individuals with serious debt problems was not bad enough, a new breed of vulture is trying to exploit their misery by giving them poor advice. 

The Office of Fair Trading has warned a dozen firms to stop making false claims to individuals who have declared themselves insolvent and taken out an Individual Voluntary Arrangement or IVA.

The latter is an agreement,  between a debtor and his or her creditors, to repay  a portion of the money they owe over a set period of time, with the help of an insolvency practioner.

There is less stigma associated with IVAs compared to bankruptcy and you will normally be able to keep your home.  To abandon such an agreement could have serious consequences as the cost of setting up an IVA can be considerable and is irrecoverable.

Bankruptcy, by contrast, is the ‘nuclear option’ for anyone in serious debt.  It can mean the losing your home, forfeiting control over your finances, losing access to credit and can place restrictions on the type of employment you can pursue.

The offending firms have been sending unsolicited letters to insolvent individuals advising them to cancel their IVAs and to go bankrupt instead. The letters suggest that the individual’s original IVA might have been mis-sold or inappropriate and that to go bankrupct would be a better course of action.

The OFT has warned the companies that if they do not stop their mailings they will be fined or closed down because encouraging someone to scrap an IVA could make their financial position worse.

 If you want to complain about receipt of one of these letters, or have another consumer gripe, the OFT Direct website  is a mine of useful information on your consumer rights and how to gain redress  http://www.consumerdirect.gov.uk/

There were more than 44,331 IVAs taken out in 2006, compared with fewer than 5,000 in 1998. The figures began to fall during 2007, but are expected to rise again during 2008.

The number of individuals choosing bankruptcy stood at 13,080 in the first quarter of 2008. This was up from 11,674 in the previous three months, but a decrease of 13 per cent on the number of petitions in the same quarter of 2007.

Bookmark this article: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • blogmarks
  • BlogMemes
  • Reddit

No end in sight to debt misery

May 2, 2008 | posted by Pam Atherton in Banking, House prices, Loans, Mortgages, UK economy, Uncategorized | comments (0)

New figures published today by The Insolvency Service show that in the first three months of 2008, 25,264 people fell victim to the insolvency epidemic.

9,614 IVAs and 15,651 bankruptcies were reported, with some debt counsellors predicting that individual insolvencies could reach 101,056 by the end of the year.

For these people, insolvency means they have already reached the end of the road as far as their debt problems are concerned. But there are plenty more  people about the befall the same fate.

Today alone, a further 292 people will fall victim to insolvency and 74 homes will be repossessed, according to Credit Action’s debt statistics.

The one piece of good news is that year on year, there has been a 22pc drop in IVAs in the first three months of 2008, compared to the first three months of 2007.

Graham Lund deputy managing director at Call Credit attributes this to the new IVA protocol which came into effect at the start of February, designed to reduce the mis-selling of IVAs, and put an end to unscrupulous IVA firms pursuing unsustainable deals.

Consumer debt in the UK has now reached a staggering £1.4 trillion, a figure that is increasing by £1 million every five minutes, according to Credit Action.

But the credit crunch is not the only problem facing consumers. You Gov says that the real rise in the cost of living is nearer 9 per cent, more than double the average salary increase of just 3.4 per cent, which means that 5 million consumers are spending more than they earn every month.

Small wonder, then, that so many people are getting into financial difficulties. But an IVA or a bankruptcy should be the last resort as both these routes out of financial ruin have a very serious impact on your credit record and ability to borrow in the future. In the case of bankruptcy, it could also damage your employment prospects.

If you find yourself in financial difficulty, the worst thing they can do is ignore the problem and hope it goes away. Under the banking code, banks now have a duty to help people in financial hardship and free debt advice is readily available from organisations such as the Consumer Credit Counselling Service (www.cccs.co.uk) , National Debt line (www.nationaldebtline.co.uk) and Citizen’s Advice www.citizensadvice.org.uk).

.

Bookmark this article: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • blogmarks
  • BlogMemes
  • Reddit