When I heard last week that Capital One had announced it would refuse IVAs
with fees totalling more than £4,500, I was staggered.
Why? In effect, Capital One was calling for IVA fees to be capped under a
one-size-fits-all approach. It was perfectly within its rights to do so. But
such an attack on insolvency practitioners by an individual financial
institution at a time when an industry-wide body is contemplating wholesale
changes seems extraordinary.
Some financial institutions simply do not understand the work our members do.
To make such a pronouncement a week ahead of an industry-wide forum called to
thrash out all the issues around IVAs proves the point. Given that we represent
97% of this industry, we will not let this go unchallenged.
As you may know, the meeting was due on 31 May. We at R3 will have sat down
with organisations including the British Bankers’ Association, the Insolvency
Service and all the other major interested parties, with the shared aim of
developing proposals covering not just IVA fees, but also other crucial issues
such as how they are marketed.
We oppose fee capping not just because it’s unfair to our members but because
it will be unfair to consumers and our creditors too. Given the imminence of
that meeting, you might think Capital One’s intervention unhelpful, or at best
irrelevant. It also appeared timed to highlight the fact that whatever might be
agreed at the meeting, the proposals may not be universally accepted. That’s the
prerogative of operators in a free market.
The reason why a capped approach to fees does not work is that every IVA
reflects a unique set of circumstances and needs. Advising on an IVA is not a
standardised process suited to a one-size-fits-all fee structure. Such a message
does our members a great disservice.
I also think it is a message that may backfire on its source. If the fees for
an IVA are capped at £4,500, then a lot of practitioners will simply leave the
IVA marketplace. The result will be less choice for consumers, and many people
who could have done an IVA will go bankrupt instead. And if they go bankrupt,
then companies like Capital One will actually get less of their money back than
under an IVA.
As we all try to seek out the best way forward for IVAs, I would be delighted
to sit down with Capital One – as with every other interested party with
something to contribute. But until we have done that, I think we should all
focus on formulating our ideas rather than trying to grab the limelight.
Nick O’Reilly is vice president of Insolvency group R3
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