Government confronts banks in IVA showdown

Indebted individuals could be being denied good opportunities to resolve
their debt issues, the government has warned in an extraordinary stand-off with

The government’s
Voluntary Arrangement
regime looked as if it was lurching towards crisis
this week, as the Debt Resolution Forum (DRF), a body representing IVA
providers, added its voice to the warnings.

Lenders are currently seeking to get a better deal out of IVAs. Capital One
has sought to put a cap on IVA fees paid to insolvency practitioners, as has
TIX, working for First Direct, HBOS, HSBC, M&S Money and RBS.

The showdown between the banks and the practitioners has led to claims from
government and the insolvency industry that the lenders’ attitude is damaging
outcomes for indebted individuals.

The Insolvency Service said in a letter to banks this week that the hardball
attitude of lenders towards IVA fees charged by insolvency practitioners could
deny people the opportunity to resolve their debt crisis.

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

DRF chairman Chris Holmes said: ‘It’s apparent that many important creditors
have decided to frustrate this initiative with artificial barriers and hurdles
that are denying debtors a sensible route out of debt.’

Holmes also criticised creditors’ reasoning for their actions: ‘[We] believes
it is a fiction that the latest unilateral actions taken by Capital One and TIX
are just designed to increase returns to creditors by driving down IVA fees.
This is particularly so in the case of TIX, where that firm’s fees appear likely
to add around £1,000 to creditors’ costs in the average case.’

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