Scammers turn to 'mis-sold IVA' letters

StepChange Debt Charity
by Lovemoney Staff StepChange Debt Charity on 09 August 2012  |  Comments 6 comments

People with IVAs are being besieged by scammers, suggesting the IVA was mis-sold.

Scammers turn to 'mis-sold IVA' letters

For the past few years we’ve constantly warned our individual voluntary arrangement (IVA) clients about scam letters that try to take advantage of people with IVAs.

We’ve heard lots of stories of IVA clients receiving ‘mis-sold IVA’ letters. These letters usually inform them that they’ve been mis-sold the debt solution and that the company can either help reduce payments to creditors or “get the debt written off” to be “debt free sooner”.

You can view a mis-sold IVA letter (PDF) sent to a client of ours in 2010. The company behind the letter had its consumer credit licence revoked by the OFT last year.

It’s telling that these letters, sent out in bulk, can somehow assume an individual IVA was mis-sold without seeing or reading the IVA proposal. Unsurprisingly it’s rubbish.

What are they trying to sell?

When someone’s subject to an IVA their name and address is listed on the insolvency service website. As this is a public register of insolvencies, it means anyone can access the details. On a regular basis we hear about fee-charging ‘companies’ taking advantage of this access for their own ends.

These companies write to IVA clients and use scare tactics to try to get the client to fail their IVA as they’re selling a service like ‘assisted bankruptcy’ (we’ve talked about these before: the firms that charge £600 to fill in a bankruptcy form).

Going bankrupt currently costs a total of £700 in fees; £175 to the court and £525 to the Official Receiver. These companies are trying to get the person to go bankrupt so they can charge fees on top of this for filling out the forms, irrespective of whether it’s the best solution or not.

Most IVA clients who receive these scam letters don’t realise what service they’re being tempted by and on a few unfortunate occasions we’ve known people who’ve failed their IVA after taking advice from these companies, only to later realise that bankruptcy is not in their best interest.

What should I do if I get a letter?

If you’re on an IVA and receive a similar letter, remember that your name and address is on a public register. It’s also important to remember that the companies sending these letters are completely motivated by profit and are often neither legitimate nor properly registered to give financial advice.

Take everything the letter says with a very large pinch of salt and get in touch with your IVA case worker if you’re concerned.

We’re a competent authority on insolvency and we look at a person’s full financial circumstances before recommending a solution.  We also have a dedicated bankruptcy team that can assist in everything - including filling in the forms - for free. There’s never any need to pay for debt advice or ‘assisted bankruptcy’ and don’t be tempted by a letter in the post, or a cold call.

If you’re on an IVA and receive a letter like this we’d recommend that you ignore it and “file it in the shredder”. Or better still, forward it to us and we’ll try as hard as possible to stop this sharp practice.

More on debt:

Credit card debts mean I'll never get a mortgage

What happens to your foreign debts if you go bankrupt in the UK?

The real result of PPI mis-selling

When money saving doesn't actually save you money

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Comments (6)

  • JoeEasedale
    Love rating 174
    JoeEasedale said

    IVA's were missold - in that they were not the best form of insolvency for the individual - in a huge number of cases. Complaining about it would make things worse, because the debt would still be there with most iva payments wasted, but the fact remains, ivas were hugely oversold by IPs wanting the best commission outcome for themselves. In 2007, the Banks created IVA forum to self regulate the iva industry and many IPs were dragged kicking and screaming into that on pain of the research done by the BBA on IVA selling methods being taken to the Press.

    So in the light of that, it is hard to feel sympathy for the IP industry in general for being hoist by their own petard.

    Sympathy should go to the customer who was missold the IVA in the first place.

    IMHO an IVA is only the right vehicle in a small minority of cases, including where employment precludes bankruptcy. By that standard it was missold thousands of times, but none of that mitigates the original debt, which existed before the IVA.

    CCCS of course, were hugely helpful during IVA forum in setting new standards that both Debtor and Creditor companies signed up to. As the organisation perhaps best trusted by the industry, no one has ever suggested that they missold IVAs, but many others have, and this article suggests that the IVA industry is blameness, which it is not.

    Report on 10 August 2012  |  Love thisLove  0 loves
  • thenikjones1
    Love rating 8
    thenikjones1 said

    I had an IVA in 2000 and by 2005 I had paid ~45% of my debt and the rest was wiped clean. Fees were charged but they were added to the debt repaid I.e. not costing me anything. Bankruptcy would have been quicker and probably cheaper but I felt it a less 'moral' option. Was I mis-sold as it cost more than bankruptcy would?

    Report on 11 August 2012  |  Love thisLove  0 loves
  • JoeEasedale
    Love rating 174
    JoeEasedale said

    It is not about the cost alone. A debt assesment will pull out which insolvency options are possible and these can then be considered. For instance, thenikjones says that they completed their iva. That alone is a tick in the correct choice box - ivas take often 5 plus years to complete, whilst no one has a crystal ball, how likely was it that your income would remain stable enough to get through those years. Some jobs have terms and conditions whereby going bankrupt is a sacking offence whilst an iva is not. So that can be a factor. A debtor who prefers an iva on moral grounds is not being missold either - that is a personal decision IF the iva looks possible in the first place.

    An iva needs to be acceptable to the creditors - some IPs (Not cccs) have taken set up fees where the proposals were a million miles away from being acceptable to the creditors and where therefore rejected.

    Many ivas have failed by year 2. The payments are effectively lost and bankruptcy beckons. In cases where the iva was missold that failure could have been predicted.

    After an IVA, it is a little easier to reestablish a credit rating than after bankruptcy but not by a huge margin.

    An IVA is a huge slog for a long time. Bankruptcy is quicker but is not for everybody. The choice of insolvency is very personal to the individual concerned, and the iva needs also to be acceptable to the creditors whilst bankruptcy does not. So IVAs definately have their place - but not in the numbers seen pre IVA forum in 2007, and after that, as the financial crisis deepened the numbers failed to fall, but the quality of choice got better imho.

    So from the information given, thenikjones does not seem to have been missold.

    Report on 11 August 2012  |  Love thisLove  1 love
  • thenikjones1
    Love rating 8
    thenikjones1 said

    Joe, I was being rhetorical as I am happy that I went for, and completed, my IVA but thanks for taking the time to write. Once the IVA was over I was able to get a credit card again almost immediately. Madness? No, for me the 5 years was a tough slog but it taught me to be responsible. I got the card as I was travelling more on business and paying expenses upfront from my reduced income - not easy!

    I read a lot about IVAs being missold and rarely anything positive, I just wondered if I was alone in being satisfied with mine!

    Report on 16 August 2012  |  Love thisLove  0 loves
  • Phil35
    Love rating 0
    Phil35 said

    People who do not understand insolvency are forgiven for thinking all the old wives tales that prevail here. Bankruptcy was given a total overhaul in 2004, so all the old cliches 'they take your house, put your name in the paper,take your possessions, it follows you for years' are pure ignorance of the law. Realisticly IVAs should be used for people with debts of over £15 ish who have assetts, either a property in positive equity or own other assetts, company directors or perhaps with the type of career that precludes bankruptcy. I regularly monitor IVAs where a partner to the debtor is included so that their income can be utilised and more importantly their part of the property value. I see people with 3/4k debts who are in a 6 year iva.70 and 80 year olds being milked of their benefits income, invalids paying with benefits,single parent living on scraps, it's criminal or ought to be. Don't let anyone mistake this; IVA IS bankruptcy the conditions are identical, don't delude your self. If you are a home owner it's still included in the deal. Except a Bankruptcy is 6/12 months and you can restart credit exactly in the same way as after an IVA, you just have to wait another 5 years. I see people who have been in a DMP for 2/3 years then passed to a sister company for an IVA lasting 5/6 years when they could have been debt free 1 year previous. It is a fallacy to think this bankruptcy is filling in forms.A phrase proffered by people with no knowledge or experience. Firstly you need over 100 pages and you need to understand what you are putting in it. the income and expenditure is a job for experts unless you want to be in a 3 year payment agreement. If you own a home or buy to let that you don't want to lose then best speak to an expert and be prepared to pay.Unless you understand the working of the official receiver and beneficial interests ,exoneration of equity, contingent creditors, antecedent transaction ,sales undervalue. Just filling in forms! Pah idiots! go back to your mac job and don't comment on what you don't qualify for.Try reading the insolvency act! If you don't use a proper accountant you'll end up with lots of tax, it's the same principle. The court visit is only the halfway point,what about the Official receiver's interview? so if you need real advice perhaps you may want to consider where to go or why your iva company is desparate that you don't call those leaflets.. Ask the IVA company? you're joking they sell only IVAs and make a fortune. One just changed hands for £30m! They needed lots of public ignorance to build that type of money.

    Report on 08 November 2012  |  Love thisLove  0 loves
  • Paul 85
    Love rating 0
    Paul 85 said

    Very well said Phil35. It seems we have similar experience in dealing with IVAs.

    Report on 25 February 2013  |  Love thisLove  0 loves

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