Insolvency Service urge IP’s to take swift action

At the annual Insolvency Practitioners Association (IPA) Personal Insolvency conference, held in Manchester last week, the Head of Insolvency Practitioner Regulation, Claire Hardgrave, urged Insolvency Practitioner’s to take swift action to deal with the poor level of practice identified in its recent research of the Individual Voluntary Arrangement (IVA) market.

What is an IVA?
An IVA is a formal statutory debt solution where a debtor enters into a legally binding agreement with its creditors. The IVA is managed by a qualified Insolvency Practitioner (IP) who ensures compliance with the terms including the debtor making regular payments to the IP which is then distributed to creditors. Whilst there are a number of benefits to entering an IVA, an IVA is just one of many debt solutions available to debtors in respect of their personal debts.

Concerns
Between July and October 2002 the Government’s Call for Evidence outcome ‘Review of the personal insolvency framework’ raised concerns in relation to the volume provider market and focused on regulatory problems regarding misleading or poor advice, mis-selling of IVAs, lack of transparency about fees and the behaviour of some IP's and IVA volume providers. 

Media coverage
In 2023 many of the concerns were brought to the attention of the public following undercover operations conducted by media outlets including Channel 4 and the BBC. A mystery shopper acting for the Bureau of Investigative Journalism also revealed that almost half the providers they spoke to provided inaccurate and potentially damaging advice.  The Advertising Standards Agency (ASA) examined 400 TikTok adverts promoting IVA’s and found that 75% breached ASA rules. Last year BBC Panorama investigated the booming debt management industry and the companies signing up people for Individual Voluntary Arrangements.

Insolvency Service research
In light of the poor media and concerns highlighted the Insolvency Service commissioned research concerning poor “take on” of IVA cases. “Take on” includes referrals from “debt packagers” (Commercial debt advice providers which do not provide any debt solutions themselves) and the period leading up to the creditors meeting at which the IVA is voted on.

The research was carried out independently and included the reviewing of phone calls between debtors and their advisers working for IVA volume providers. The research covered 310 IVAs which were both registered and terminated from 17th September 2021 to 17th September 2023.

 
Key findings
On 17th October 2024 the result of the research was published and found that of the 310 randomly selected IVA’s 60% exhibited evidence of poor take on practice. Out of the 310 cases 185 cases met the definition of poor take on (insufficient application of requirements in the relevant Statement of Insolvency Practice and the IVA Protocol). The more specific concerns of those 185 cases were as follows:

·       In 75% of cases there were concerns over the accuracy of a consumer’s income and expenditure

·       In 51% of cases there were concerns around ensuring consumers understood the terms of the IVA proposal

·       In 45% of cases there were concerns around staff incorrectly disregarding alternative debt solutions

Speaking at the IPA conference last week Claire Hardgrove said “There is no doubt that the findings of our independent research raised concerns among many groups within the IVA industry. But it also provides a robust base of evidence to show that real improvements are needed.”

“I’m hopeful that the findings will provide helpful insight, identifying for insolvency practitioners changes to practice, training and governance that will make a difference to vulnerable consumers.”

Despite the findings of the research, it is clear that IVA’s over the years have served as a positive debt solution for many consumers in debt. With increased training, awareness, improved governance and compliance they will continue to be a viable and effective debt solution for many debtors.