Following the release of today’s Q1 2019 Insolvency Service statistics, Richard Haymes, financial difficulties expert at Equifax, calls for broader regulatory action on personal insolvency and debt: “Despite a slight quarterly drop from record levels in Q4 2018, personal insolvencies are up 16% year-on-year and Individual Voluntary Arrangements (IVAs) have risen 24% in the same period, highlighting the need for intensified regulatory oversight.
“The drivers for the general trend of rising insolvencies, such as soaring credit card debt (now £2,649 per household*), economic stagnation and the problematic roll out of Universal Credit remain, but other industry developments are directly impacting volumes, such as the re-emergence of a number of historic major players offering IVAs. These companies, which also offer debt management services, have transformed their businesses following the first FCA thematic review in 2015. Having met the regulatory requirements, they are once again in growth mode. Against this rising tide, debt charities lack the financial resources they need to market their non-commercial, free of charge services. These include alternatives to IVAs such as Debt Relief Orders, which can often be more appropriate for consumers.
“Regulatory intervention has worked in the debt management space. The second FCA thematic review of the debt management market released in March showed significant improvements in managing customer outcomes. With volumes of personal insolvencies and IVAs historically high and more firms beginning to crowd the sector, regulators need to remain focused on adapting to a fast changing market.
“While the government has positive plans in place, such as formalising Breathing Space and the consultation on Statutory Debt Repayment Plans, these won’t take effect until at least the end of this year. Facing potential headwinds from Brexit and wider economic conditions, the financial situation for many individuals and families is likely to worsen.
“Debt is a wider issue that goes beyond regulatory bodies, charities and government, and every facet of society must also burden some responsibility. We urge individuals struggling with debt repayments to talk to their creditors as soon as possible, and compel creditors of all types to use data-driven methods to identify customers at risk of financial difficulties and support them in accessing high quality advice.”