IVA Providers

MONDAY, NOVEMBER 27, 2006

Individual Voluntary Arrangements are very popular today with more an more people acquiring them and as comes with increased demand, there a number of companies that have begun to offer IVAs. These arrangements allow those in debt to get a deal with their lenders where they will pay off part of the remaining debt on a fixed schedule as negotiated by the lender and the one in debt. As a result, those in debt only have to pay off part of the debt they owe and creditors will know when to expect loan repayments.

IVAs have gained popularity over the past year and already there have been dozens of new companies that have entered and found success in providing IVAs with many of these companies listed in the stock exchange.

However, this is bad news for banks who earn from bankruptcies and they have been lobbying against IVAs for the last few months in an attempt to curtail their growth. Government reports that will be released this Friday show that there has been another surge in the number of IVAs filed in recent weeks.

Leading IVA provider firm Accuma is one of the fastest growing and most successful firms offering IVAs. Yesterday, they reported a 250% surge in turnover leading to a profit of £1.7m. This is especially amazing considering they did not make a cent in profit in 2005.

Chief executive Charles Howson said, “The market is very buoyant because of the huge increase in consumer debt. Even with some lenders tightening their lending criteria now, frankly moving forward the damage is done. A lot of people are on a knife edge, which is why we are growing.”

Accuma and other IVA providers such as rival Debt Free Direct are saying that banks are getting what they deserve and it is the bank’s fault that they allowed anyone who wanted a loan to get one, without taking the proper steps to determine whether the one taking a loan would be able to pay it back.

One of the main reasons IVAs are so popular is because it allows people to keep their assets such as their house and / or car and those who get the best arrangements can end up paying just 37 cents for every pound of debt allowing them to be debt-free in about five years after starting IVA payments.

KPMG partner Steve Treharne, says that people are getting to personally involved as they have much to gain from suggesting IVAs and are looking out for themselves, not those whom they are advising.
'There is an issue over the quality of the advice being given. The providers do have a vested interest in pushing people down the IVA route,' he says. 'The banks are sitting up and taking notice.'

Still, many expect the message that IVAs are sending, “spend now and reduce your debt later” will lead to major problems in the economy. This combined with the fact that the Bank of England is planning on raising interest rates to rates to 5% next month could prove problematic. It will be interesting to see how this plats out over the next few months and what banks do if more and more people begin to take out IVAs.