Institute of Chartered Accountants in England and Wales give guidance on IVA regulation
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.
