Insights: Research into Concerns Around Individual Voluntary Arrangements (IVAs)

Summary

Commissioned by the Insolvency Service, this October 2024 report investigates the prevalence of poor take-on practices in Individual Voluntary Arrangements (IVAs). The research assesses whether IVA providers follow regulatory protocols, particularly around consumer advice, affordability assessments, and fee transparency. The findings aim to improve IVA oversight and ensure better consumer outcomes under evolving insolvency regulations.

Key Take Aways

  • High Rate of Poor Take-on: 60% of sampled terminated IVAs showed poor practices during setup.
  • Prevalent Issues: Income and expenditure mismanagement occurred in 75% of poor take-on cases, and inadequate explanation of IVA terms affected 51%.
  • Call Data Limitation: Lack of call recordings in 43% of cases may have led to conservative estimates of poor practices.
  • Termination Reasons: 74% of IVA terminations were due to consumer payment arrears.
  • Consumer Understanding: Many consumers did not fully grasp IVA obligations, impacting sustainability.
  • Referrals and Regulation: Cases involving FCA-regulated debt-packagers showed statistically higher poor take-on rates than those from non-regulated sources.
  • Termination Timing: Most IVAs fail within the first two years, prompting questions about suitability assessments at initiation.
  • Impact on Vulnerable Customers: 30% of poor take-on cases involved insufficient handling of consumer vulnerability.
  • Regulatory Developments: Reforms such as the revised Statement of Insolvency Practice (SIP 3.1) and FCA restrictions on debt-packager fees aim to address these concerns.
  • Consumer Debt Trends: IVAs represent the majority (62%) of individual insolvencies in England and Wales, highlighting their significance in debt relief frameworks.

Innovation

  • Enhanced IVA Standards: The revised SIP 3.1 emphasizes comprehensive consumer advice, vulnerability checks, and clear explanations of IVA terms.
  • Monitoring Improvements: The Insolvency Service’s increased focus on data collection and call monitoring seeks to reduce poor take-on instances.
See also  INSIGHTS ¦ Credit Information Market Study: Implications for Creditors

Key Statistics

  • 60% of terminated IVAs showed poor take-on practices.
  • 43% of cases lacked SIP 3.1 call recordings, affecting evidence reliability.
  • 74% of terminations resulted from payment arrears.
  • 66% of referrals from FCA-regulated debt-packagers experienced poor take-on, compared to 53% from non-regulated sources.

Original: LINK


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