Government warns banks over attitude to IVA fees
Insolvency Service looks to meet insolvency stakeholders, issuing a concern that lenders are pushing people away from IVAs when it is their best route out of debt
Insolvency Service looks to meet insolvency stakeholders, issuing a concern that lenders are pushing people away from IVAs when it is their best route out of debt
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.’
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