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New Governing Code For IVAs Announced

There will be a new governing code for Individual Voluntary Arrangements starting this year. The UK Insolvency Service has said that the new practices, which have been agree to by the industry, will make the IVA process more clear to the average citizen.

There have been, in the past, cases of IVA companies that have marketed their services in ways that the Insolvency Service did not like. Many consumer groups from across the UK were hesitant with the new changes but for the most part they welcomed the changes.

An Individual Voluntary Arrangement (IVA) is a binding agreement by law between a creditor and debtor in which the debts of the debtor become frozen. They are available to people in England and Wales. Scotland has an alternative known as a Protected Trust Deed. In return for freezing the debts, the debtor agrees to pay back a predetermined amount every month until the remainder of the debt is paid off. Typically IVAs last five years but it can vary depending on the situation.

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The IVA process was originally introduced by the UK government to help businesses avoid bankruptcy. But they soon became popular with individuals instead.

In 2006-07 there were as many 45,000 IVAs in the United Kingdom, compared to around 5,000 in 1998-99. The numbers fell again in the fall of 2008 but are expected to rise again this year.

When IVAs starting becoming popular around 2005-06, a lot of companies started providing the service but the market was new and regulations weren\’t what they are now.

The Office of Fair Trading (OFT) questioned some IVA companies in 2007 about the way they were marketing IVAs to the public. The OFT, said that some of these companies were trying to mislead people. There was a major concern among government officials and consumer rights groups that IVAs were being sold to people that didn\’t really need them.

The new regulations were put together with the help of IVA providers as well as the UK\’s Insolvency Service.

The minister responsible for the protocols, Pat McFadden said that they hoped this would create greater transparency in the IVA community. McFadden went on to say that the new code of conduct was a significant achievement for all involved.

The British Bankers\’ Association were said to be happy as well – they commented that consumers would have a clearer decision-making process put in front of them from now on. They went on to say that clarity was very important when it came to determining a proper debt solution.

All three groups involved in the new code of conduct had to work in unison but McFadden said they all made compromises to ensure things worked in the favour of the debtor. We shall see how these practices work out in the UK debt market.

The Insolvency Service went on to say that they would be monitoring IVA procedures in the coming months to make sure the code of conduct is followed. They said a committee would be formed to make sure everything went as planned.

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