IVA Protocols Announced
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 Individual Voluntary Arrangement (IVA) is a binding agreement by law between a creditor and debtor in which the debts of the debtor become frozen. They are available to people in England and Wales. Scotland has an alternative known as a Protected Trust Deed. In return for freezing the debts, the debtor agrees to pay back a predetermined amount every month until the remainder of the debt is paid off. Typically IVAs last five years but it can vary depending on the situation.
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 approximately 45,000 IVAs taken out in 2006 – significantly more than 5,000 in 1998. The popularity of Individual Voluntary Arrangements dropped in 2008 but numbers have increased into 2009-10. The trend appears to be on the rise due to the recession.
When IVAs starting becoming popular around 2005-06, a lot of companies started providing the service but the market was new and regulations weren’t what they are now.
Government regulators from the OFT had to step in after several IVA companies put out adverts that were said to mislead the public in 2007. Consumer rights groups across the UK, at the time, said that IVAs were being “sold to people that didn’t 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.
The BBA (or British Bankers Association) also felt that the new regulations would mean greater clarity for the IVA marketplace. They went on to say that UK citizens would have a clearer understanding of all their options going forward.
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 Insolvency Service went on to say that they would be monitoring IVA procedures in the coming months to make sure the code of conduct is followed. They said a committee would be formed to make sure everything went as planned.
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