Following the recent media attention on the large increase in number of IVA’s, and projections for further increases over the next twelve months, the ICAEW have taken steps to ensure that people in financial trouble are getting the right advice.

The ICAEW are presently in discussion with the Department of Trade & Industry and main banks with regard to some of the misinformation presently in the public domain, such as a recent press allegation that IVA’s are not regulated - which is simply not the case.  The ICAEW wish to encourage “proportionate, accepted and industry wide standards” covering appropriate practice in areas such as advertising, reporting and advice to insolvent individuals. 

In addition to ICAEW are intending to upgrade their approach to the monitoring of high volume IVA providers, which are likely to lead to an increased frequency of monitoring visits and a more, indepth review of certain areas such as the quality of advice given.  Forthcoming legislation changes with regard to the proposing of IVA’s will require the IP to confirm in writing the advice provided to an individual before he commences work.  Those individuals will then have to confirm that they have understood the advice and the course of action which is being proposed in order to make a reasoned decision.  This is required to eradicate those firms who only offer one particular solution, and especially where bankruptcy may well be financially advantageous to the debtor compared to an IVA.  One wonders what the banks will make of all of this?

With regard to the marketing and promotion of IVAs, the Office of Fair Trading has recently warned 17 firms providing IVA services, that it considers their adverts and websites potentially mislead customers.  These businesses have been warned to take immediate action to remove or amend a number of potentially misleading statements in order to comply with OFT advertising guidance.  Examples of such statements include:-

• falsely claiming that “up to 90% of your deby may be written off”, when the maximum would be in the region of 60-70%
• falsely implying that they can “guarantee” a favourable outcome by the use of such phrases as “stop all interest and charges”
• failing to state that set up and administrative fees will be required and will be taken out of payments before the creditors will receive any payment
• failing to display the required warnings with the same prominence as the savings required
• failing to state that homeowners may be required to remortage their properties and
• failing to state that entering into an IVA also affects an individual’s credit rating

Clearly anyone thinking about taking advice with regard to their financial difficulties ought to beware firms which advertise in the above manner - and ensure that advice provided by an insolvency practitioner licensed by the ICAEW is presented in writing.  It is widely anticiptated that the other regulatory bodies will shortly follow the ICAEW lead.

When you have recognised that are suffering financial difficulties, and feel there is nowhere to turn, there is now a wealth of firms offering advice as either insolvency practitioners, debt management companies or charitable operations.  Many of these companies operate with extensive marketing budgets, and the media is full of companies offering to assist you to write off substantial portions of your debts.  To the untrained eye, the decision as to which company to instruct can be daunting, in an area where there is yet such a degree of conflicting advice.  If you feel that you are unable to cope with the financial pressure any more, it is usually wise to obtain two or three options in order to find a balanced view.  But what sort of things should you ask an advisor in order to arrive at a decision to instruct them?  I have listed a few pointers which should help.

1  What solutions do you offer?  Most firms specialise in either Individual Voluntary Arrangements (IVA) or Debt Management Plans (DMP).  As such, the advice you receive may well be biased towards the core business of that particular firm, and you may not receive adequate advice as to the advantages of all options available to you.  Make sure the advisor you choose counsels you on the implications, advantages and disadvantages of bankruptcy, IVA’s and DMP.  Beware anyone who tells you what you should do straight away - but favour those who recommend that you have a good think about all options and choose the right solution.  Bear in mind that the wider the options available at each advice firm, the more likely you are to get best advice and choose the right solution.

2  What procedure should I choose?  From your chats with the advisors, does it feel to you that clear ethical procedures are in place and followed by all staff who will be working on your case.  Is the firm able to provide you with feedback from other clients, have they received positive or negative feedback on the iva.co.uk forum, and have they given you the opportunity of a face to face meeting?  Do you generally get a gut feeling that the firm is going to act in your best interests, or are they only interested in taking your money?  Ask your creditors if they have heard of the advisor, and do they have any postive or negative comments to make.  Ask them what their track record success rate is at creditor meeting approvals and successfully completed proposals.

3  At what point will you recommend a solution?  Are they telling you to do an IVA before they have gathered up all of the information from you and conducted a detailed telephone or face to face interview?  You should be wary if they have not fully investigated your personal circumstances prior to providing advice.  Anyone who comes up with a sensible solution in less than half an hour, is probably being motivated by selling you a specific product rather than finding the right solution to suit your circumstances.

4  Do you charge for advice?  You should be wary about paying for advice until you have agreed upon a solution.  Many advisors would prefer to see you paying contributions straight away, even when your proposals are being researched and prepared.  This is a good way of ascertaining whether you can afford the payments prior to formally committing to a repayment plan, however do ensure that your advisor offers you a full money back guarantee in the even that the solution is not acceptable to your creditors, or you change your mind.  After all this money is money which should be held in trust for your creditors at the end of the day.

5  What is the process?  How much work is the advisor actually going to be doing for you?  Will you be left to fill in complicated and lengthy documents on your own?  Will they write to your creditors and deal with queries in the meantime?  Can you ring them at any time for advice?  What is the timescale for completing the work?   Are they going to refer you on to another advisor?

Before you contact the company have a detailed list of your creditors and a household budget showing your income and expenditure (not including unsecured debt repayments) to hand.  Also make up a checklist of questions you wish to ask, and then you can compare the answers in making your final judgement.  Remember you have to work with these guys perhaps for the next five years, so the “marriage” must feel right and you must be assured that they are going to look after your interests as well as the creditors in the long term.

Happy hunting to you all, and don’t forget to use the forum for more specific advice.

One question I frequently get asked by clients is how and IVA or Bankruptcy will affect their credit rating.  This is perfectly understandable, as in dealing with a financial problem, most people want to see their way out of the other side, but what about those people who on the face of it do not have unmanageable debt problems?  What can they do if they are refused credit without explanation?  This can be embarrassing, cause suspicion amoungst partners and family members, and just be extremely inconvenient in our ever increasing “borrow to buy” environment.

If you fall victim of a credit application being refused, you can check your personal file held with any of the three credit reference agencies - Experian, Equifax and Callcredit.  It may be entirely possible that there are false entries on your file - either by mistake or you could be the victim of identity fraud.  A full report of your credit file (on-line) costs between £10 and £15, or £2 if you are prepared to have it posted.  You can also find out how you have “scored” which will indicate the strenth of your application in the eyes of a prospective lender.  This may seem a bit “Big Brother”, but the banks are relying more and more on the sharing of data and it is just as well to know what is being held against your name and address.

In addition to an exceptional report, you can open an account with the agencies which will alert you of any changes to your credit report either by e-mail or SMS as soon as they occur.  This involves the payment of a monthly subscription, and does allow you to access your credit file at any time to check on entries made.  This is a useful and relatively cheap service for individuals who have either been discharged from bankruptcy, or successfully completed IVA’s, to actually monitor their credit repairing over a period of time.

Your credit file will include details of County Court Judgements, IVA’s, bankruptcies and also open credit agreements and bank overdrafts.  It is perhaps odd, in these days of credit being freely available, that a note of too many credit checks by lenders may give out negative signs as to your creditworthiness.  This should be especially noted by parties who frequently shop around for the best interest rate, as this is likely to result in several entries against your name which can ultimately affect your application.

In the unfortunate event that you do find entries which are incorrect on your credit file then you should write to the agency concerned and advise them of your position.  You may well need to provide evidence - for instance if a debt has been repaid, or an IVA concluded - and this will either be posted onto your file or the adverse entry will be removed.  In the event that your file has been tainted by a family member’s record living at your address, then you can submit a Notice of Disassociation - which has the effect of removing any link to you and the defaulter.