Last week the Insolvency Service released data showing that the number of IVAs failing in their first year has increased from 4.1% for arrangements started in 2013, to 8.4% for those that started in 2018.
Given the significant rise in first year failures and the concerns of the whole sector around IVA advice and outcomes, Freeman Jones is calling for increased transparency and can report that our first-year failure rate for IVAs that started in 2018 is 2.5%.
IVAs can be an excellent debt solution for the right customers: key to this is the advice process. Freeman Jones is part of a wider group that offers customers free, impartial debt advice so we are able to offer customers access to the full range of debt solutions available, as well as budgeting advice and signposting, where an IVA isn’t a suitable solution.
Customers must be made fully aware of the details of the solution that they are signing up to, the restrictions and rules that apply whilst they are bound by it, and the support provided to help them stay on track with their arrangement. It is vital to get a detailed understanding of customers’ income and expenditure and what payment is realistic and sustainable for them, whilst also ensuring that the proposal covers any expected change of circumstances.
Head of Insolvency Catherine McNeill commented: “Across the whole debt advice sector, we’d like to see more transparency and debate about customer outcomes. For example, in Scotland the Accountant in Bankruptcy publishes Trust Deed success rates split by provider. Our sister firm, Wilson Andrews, saw 90% of its customers successfully complete their Trust Deed in 2018-19, whilst some of the largest providers in the sector are seeing up to 30% failure rates. If all firms had to publish their failure and completion rates, or if they were published by the regulator on an industry body, this would drive better outcomes for customers sector wide.
“For the right customers, IVAs can be an excellent way to clear their debts. We work hard to provide customers a high level of support right from the very start of their IVA journey and throughout the term of their arrangement. For our vulnerable customers our Extra Support Team provides additional and personalised help when they need it too. Our aim is to give all customers the best possible chance of completing their IVA and becoming debt free.
“In fact, in 2019 5,400 Freeman Jones customers successfully completed their IVA and had £80m of their debt written off by creditors, leaving them debt free. Over the same period we returned £30m to creditors.”