IVAs have become increasingly popular over the past few years because they provide a simple solution to taking care of great volumes of personal debt. They allow the person that is struggling to consolidate their debts into one manageable monthly payment and in return for keeping up with the terms and conditions, all interest and charges are frozen. Once the term has ended, any debt that is outstanding is written off and the person is then declared debt-free.
This all sounds great if you are in the position where an IVA might be an option. Reduced payments, no threatening phone calls, debt being written off; it sounds like the perfect solution. If you spoke to a financial expert and they advised you fully of all the potential downfalls of an IVA then that’s fine, but when you’ve been mis sold an IVA then it’s not quite as glamorous.
Like all things financial there is a strict code of conduct that must be obeyed by providers of debt management plans. They must be transparent and not misleading and they have to be very careful in how they advertise the particular product they are selling. In the case of IVAs,
They cannot guarantee you that their proposal will be accepted by your creditors before they have been in contact with them
They are not allowed to guarantee that you will be debt-free at the end of the process
They cannot tell you that they will guarantee to lower your debts significantly because the creditors are under no legal force to accept your lower payment offer
If any of these points have not been enforced correctly then you could have a case that you have been mis sold your IVA.
Mis-Sold IVA What to Do
If you have been mis-sold an IVA then you’ll want to know what to do to make a claim. The Financial Services Authority and the Insolvency Service have rules that must be adhered to in order to stop this sort of thing from happening, but unfortunately some rogue cases do slip through the net every once in a while. A lot of the complaints procedure will be based on how the IVA offer was worded and advertised.
An IVA is just one solution to your debt problems but there are other debt management plans that may be more suitable to your unique position and it is the job of your Insolvency Practitioner to make you aware of them. Even if the IVA is the most suitable debt management plan for you they must truthfully explain to you that it is not a quick fix and there are some serious downsides to having one. If it has been mis-sold to you then the first thing you should consider doing is getting into contact with the Financial Ombudsman.
The Ombudsman is a neutral governing body whose job it is to make sure that the rules have been applied correctly and fairly. In addition to this, all Insolvency Practitioners are signed up to a voluntary code of practice called the IVA Protocol. This protocol ensures that the process of setting up an IVA is transparent and fair and also has clear guidelines on the conduct that must be followed. If the IP is seen to be in breach of this, then the Financial Code Authority (FCA) must also step in to investigate.
Financial Ombudsman IVA
Normally the first step with registering a complaint would be to contact your Insolvency Practitioner or the company you are dealing with directly to see what they say about the situation. If they do not responded to your complaint in a way that you feel was to your satisfaction then you can take the complaint to a higher authority. The Insolvency Services’ Complaints Gateway will find out which governing body the IP is registered with and the will investigate from there. If you are not happy with the outcome of that investigation then you can go directly to the Insolvency Service themselves.
You can always bypass one of these later stages and go directly to the Financial Ombudsman to sort out the problem. The Financial Ombudsman are required to step in if you have evidence that your IVA was mis sold to you, but the more evidence you have to back up your claims the smoother the process will be.
Contact details for the various different departments are as follows:
The Financial Ombudsman are a neutral body that were set up with the aim of settling financial disputes relating to codes of conducts. They are not in the service of the Insolvency Practitioners and have no loyalty to them. Their job, pure and simple, is to rectify the problem regardless of who is at fault.
IVA Complaints Forum
IVA complaints forums have increased with the same rapidity of people taking out IVAs. The internet can be a curse and a blessing for this; it’s great that you have access to so much information almost instantaneously, but the bad thing is that much of it is inaccurate. This may be because every case is different and the advice that people read is not relevant to them, or sometimes people let their own bad experiences and emotions rule their comments and just give out information that is wholly inaccurate and false.
There are literally thousands and thousands of forums to choose from, and if you do decide to use them you must remain focussed on your problem. Try to take advice that backs itself up with links to official channels and not from someone who is just angry because they have been an unfortunate victim of a bad Insolvency Practitioner. People that quote laws and official text from the codes of practice are far more likely to help you in your search for help.
If you don’t feel comfortable sharing details of your finances on these chat rooms and forums then try to resolve things yourself directly. Speak to the IP and the various other bodies that are there to resolve these issues but if you are in any doubt of your rights then check the terms and conditions paperwork that you signed. If you are still unsure, a quick internet search should provide you with all the rules and regulations that apply to you.
Mis Sold IVA Compensation
If you have been mis sold an IVA then you may qualify for some form of compensation. How much you will receive depends on the severity of your case and how long the IVA has been in operation. A mis sold IVA amounts to professional negligence on the IPs behalf so it should be investigated for no other reason than to make sure it doesn’t happen to someone else.
The actual issue of compensation is a bit of a sticky subject. If an investigation has been carried out and it is ruled in your favour, you may well be entitled to compensation. The trouble is that under the terms and conditions of an IVA, any windfalls of money that you come into should be declared and be paid into your IVA. So, any money you are awarded as compensation may just go straight back into paying off your debts and you won’t see a physical penny. As everybody’s situation is different this may not be accurate for every case, so make sure you do your homework, gather as much evidence to support your case as possible and ask the question about whether compensation will be paid directly to you or towards paying your debts.
Mis Sold Debt Advice
If you are looking for mis sold debt advice there are so many avenues to choose from that it can make your head spin. There are;
Charity organisations such as stepchange
Companies that specialise in both debt management and compensation claims
The Financial Code Authority
The Insolvency Service Complaints Gateway
The Insolvency Services
The Financial Ombudsman
Friends and family and so on and so on.
There really is an endless stream of advice out there but who should you listen to and who can be trusted? Impartially speaking, the Financial ombudsman are a completely neutral body so you will get the most honest response from them. However, they will probably want background information and proof before providing any concrete answers.
So where does that leave you? A mis sold IVA is a serious breach of trust between you and the IP that set it up for you. Try to filter out noise in chat rooms and seek only facts - if you start taking advice from a forum that says ‘well, I heard…’, you’re not going to get very far. Level-headed advice is usually available from charity organisations too as they have nothing ulterior motives to chase. There is no financial incentive in it for them, they just want to help those that need it.
Mis Sold Debt Management Plan
If you were you promised you could write off either all or a large portion of your debts then you have been misinformed. In truth you will be paying back at least 50% of what you originally owed. It is how the wording is phrased that can give you false hope - your debt will never be fully written off. Think of it this way; if you were owed a considerable sum of money by someone would you let them get away with paying nothing back? Of course you wouldn’t, and it’s the same for your creditors. Although not paying back 50% of your debts is a considerable chunk, it’s not ‘nearly all’ either. This wording is incorrect and if you have been sold an IVA on the basis of this then it has been mis sold to you.
An Insolvency Practitioner, or IP for short, is a legal representative and it is their job to make sure that the ins and outs of the IVA are explained to you fully. If they promised you that your debts can be wiped out completely, or that it was the easy way of getting rid of all your debt then they have broken the code laid down by the Financial Services Authority. Why would they do this? What’s in it for them?
Your IP will put together a payment proposal on your behalf for your creditors to vote on. If the creditors accept the payment plan then the IP becomes custodian of that account. Instead of making several payments to different creditors you will make one payment to the IP and they will distribute it amongst the creditors proportionately. Still don’t see what’s in it for them? Out of every payment you make the IP takes their own cut out first before distributing the rest. For them it’s easy money and the more people they have on their books making IVA payments the more money they receive for themselves for doing very little in reality.
If your IP has sold you an IVA on the premise of it being the easy way out, only taking a short while to sort out, or not explaining that it was a form of insolvency and the ramifications that comes with that, then they have mis sold you a debt management plan as an easy way to line their own pockets.
Claim Back Debt Management Fees
If you have been mis sold an IVA it’s reasonable to assume you’d like to claim back the debt management fees that you had paid. The Insolvency Practitioner takes their own monthly fee out of the payment that you trust them with distributing to your creditors. The IP gets paid before anyone else does. If an IP has thousands of fee-paying clients then it’s easy money for them.
If, however, they have set up the IVA dishonestly by luring you into a false sense of optimism, then you would have every right to want the money back that you had paid to them. They may not have even explained that they take a portion of the payment that you pay, which, again, isn’t legal.
The amount that the Insolvency Practitioner takes all depend on how much you are paying towards your debt management plan. Each plan is different so every IP payment is different too. If you are looking at claiming these payments back then you will have to build up a strong case against the IP. This means going back through all of your terms and conditions and reading what you have signed up for thoroughly.
A lot is riding on how the contract is worded and IPs have become more vigilant in making sure that their terminology is water-tight. What you are looking for is evidence that they gave you unrealistic or untrue promises. So, if they told you they could get all of your debts written off, most of your debts written off, or guarantee that you would be paying less, you were mis sold your IVA. Also, if they didn’t explain that there would be a monthly fee payable for their services then this is also a mis selling.
*Up to 85% of debt can be written off in some individual cases. Depending on your own situation, the amount which can be written off will vary from person to person. Realistic levels of debt to be written off are between 20% and 85%, however this depends on your current credit policy, income and personal assets.
Your information will be passed to a third party organisation working on a model of none advice. These advisors will be able to talk through IVA (Individual Voluntary Arrangement) opportunities with people within England, Wales and Northern Ireland. Help can only be offered following a thorough fact-finding process. When an individual meets the required criteria for an IVA, advice can then be provided.
Help and advice given will be through registered insolvency practitioners with all necessary expertise. Debt Advisory Service, along with any third-party organisations, will not give advice with regards to Debt Management Plans (DMPs). Professional debt counselling and credit services are available free of charge from specialist Money Advice Services.
If Debt Management is the option you want to proceed with, All advice will be provided by the Debt Management company.