IVA providers face crunch meeting today

IVA providers face a crunch meeting today with the UK’s major lenders to find
out whether they face a new regime of capped fees, a move that insolvency
practitioners fear could hit debtors’ options and force many into bankruptcy.

The meeting between the
Bankers’ Association
(BBA), other lenders and debt management businesses is
expected to see lenders propose a capped fee they will pay to those providing
IVAs – while insolvency experts are calling for fees aligned to a negotiated

Fears have been raised about the proposal after lender Capital One decided to
introduce a fixed fee of £4,500 per IVA.

Insolvency practitioners have criticised the move, stating that the fee cap
was ‘short-sighted’ and would force providers out of the market, leaving debtors
to take out an informal debt management plan or go straight into bankruptcy.

‘You get what you pay for, you want a Rolls-Royce service, but will only pay
enough for a Mini-Metro,’ said Nick O’Reilly, president of R3.

Mark Allen, head of IVAs at
Grant Thornton,
said his own discussions with the banks suggested they were against following
Capital One into fixed fees: ‘If you do what Capital One said it will, a ceiling
on fees doesn’t incentivise practitioners to get more money for them. If fees
were aligned to a percentage it would benefit everyone,’ said Allen.

Debtmatters operations director Michael Shirley said capped fees would not be
commercial for many IVA providers, especially if the lenders squeeze the
providers early on in the insolvency process.

IVA providers currently spend around £2,000 preparing the case for an IVA
before it is presented to creditors, of which a proportion of these costs are
recouped once the debtor begins making payments.

Shirley claimed that some lenders were unhappy about the costs IVA providers
claim they incurred during the initial phase: ‘If it is a case of squeezing
upfront, that will cause problems for insolvency practitioners,’ said Shirley.

A BBA spokeswoman said fees were a ‘commercial matter’ and the meeting was
intended to look to introduce transparency into IVA fee structures.

Related reading