The Insolvency Service has raised concerns that the hardball attitude of lenders towards IVA fees charged by insolvency practitioners could deny people access to the best way to resolve their debt crisis.

The government agency has written to insolvency industry stakeholders warning them that denying debtors the opportunity to enter into an IVA because of the fees charged by practitioners 'runs the risk of denying some debtors access to a debt management solution which has been identified as the most appropriate solution for them, and for their creditors'.

The statement could be influential in the ongoing problems between IVA providers and lenders.

Lender Capital One courted controversy recently when it proclaimed that it would introduce a capped fee for IVA providers acting on its behalf.

IVA figures fell in Q2 2007, which some insolvency practitioners attributed to lenders refusing to agree to IVAs unless insolvency practitioners' fees are reduced.

'The longer term effect could be to push more people into bankruptcy, where creditors would get an even lower return,' said the Insolvency Service.

The agency said that meetings between the all parties in the insolvency industry had demonstrated 'consensus' on many aspects of managing the IVA process. 'We hope that the recent developments will not halt that progress,' it said.

Discussions between the Insolvency Service and key stakeholders will begin on Tuesday.

'[Lenders] won't pay anyone to do IVAs,' said Barry Lewis, senior partner at Harris Lipman. 'It pushes the bankruptcy route.'

Further reading:

IVA figures drop for Q2 2007