IVA Failure Rates

UpToMyNeckInIt

The issue of IVA failure rates has been raised in other threads on this board. It's a big discussion area in its own right, so I thought it deserved its own thread.

Anyway, I found a good comment from a well-regarded IP (on another forum from 2009), which perhaps is still good advice today, for anyone considering an IVA:

"The industry quotes a failure rate of around 30-40%, but some firms operate on a much lower figure. In my own firm we expect to lose only 5% of new cases we take on, over an average five year period - although this may rise slightly given the amount of people being made redundant or having their salaries cut at the moment.

IVAs fail for a number of reasons, but the overriding factor for a lot of defaults is an unrealistic proposal in the first place. Income and expenditure accounts which bear no relation to a debtor's true income and expenditure, and creditors who insist on [CCCS] allowances rather than trusting the debtor's and IP's own calculations - in the IPs case mostly based upon detailed research of their client's circumstances - are factors which add to failure.

In addition to poor research, the main other factor to cause failure is change of circumstances - expanding families, separation and divorce, redundancy and poor business trading are all very common factors.

If you put IVA failure into the same context as people borrowing money who for some reason cannot repay it - I expect that the correlative failure rates and reasons would be somewhat similar. Overstretching and change of circumstance being major issues.

It is very easy to view bankruptcy as an easy option - and I am sure some of our posters who have experienced this would have more to say on the matter. It is definately not easy, and most people genuinely do want to repay their creditors to the best of their abilities.

I suspect this is why they choose the five/six year route rather than then three. And I do think that we will see a hardening of the allowances made to bankrupts over the next year or so."

(When doing the SOA, does that mean bankrupts are allowed more generous allowances, than those going into an IVA?).

Overriding message: Do your research to get the best debt solution, and choose a decent IVA company if that's the route you are considering.

GD2_2

I see comments referring to the "Pro IVA Brigade" which is a little unfair, as proper comparisons with the alternatives are not made. All debt solutions/remedies/decisions carry an in built risk of failure, so to knock one particular product so heavily, whilst the main alternative seems to be "go to CCCS and live on beans on toast for 20 years" instead is short sighted in my view.

It WOULD help enormously if the creditors "best chums" at CCCS would allow sympathetic and responsible IP firms to use CFS guidelines rather than their own "maximise my commission/creditor return" made up rubbish. There is a reason why CCCS guidelines are so low, and it clearly isn't that they are an accurate reflection of living costs, or even a half hearted attempt to help debtors.

UpToMyNeckInIt

GD2 wrote: »

I see comments referring to the "Pro IVA Brigade" which is a little unfair, as proper comparisons with the alternatives are not made. All debt solutions/remedies/decisions carry an in built risk of failure, so to knock one particular product so heavily, whilst the main alternative seems to be "go to CCCS and live on beans on toast for 20 years" instead is short sighted in my view.

It WOULD help enormously if the creditors "best chums" at CCCS would allow sympathetic and responsible IP firms to use CFS guidelines rather than their own "maximise my commission/creditor return" made up rubbish. There is a reason why CCCS guidelines are so low, and it clearly isn't that they are an accurate reflection of living costs, or even a half hearted attempt to help debtors.

...and I thought I was cynical of CCCS!!!

I agree.

In an IVA myself, and still (despite some negative comments on this forum in particular), think it is a good solution to my problem.

GD2_2

That's the thing though, I'm not cynical of CCCS. If you were in debt it has to be very tempting to use a free service.

What I AM cynical of is the hype, the smoke and mirrors, and the, occasional, downright lies that are perpetuated on here and elsewhere. tell it as it is, it won't make a dent in your client numbers as you will still be free to the debtor, but they seem very reluctant to do so. One example for you. Under OFT guidelines on DMP's, which also apply to CCCS, any payment received from a debtor must be paid out within 5 working days. No interest is allowed to be earned on held funds either.

CCCS pay out once per month, on 26th or 27th I think. Now, most people get paid either at the end of the month, occasionally the 15th. Most peoples payments will therefore arrive at CCCS AFTER the payment out date, meaning they are held for almost a month. They also earn interest on these monies. I have seen a reply on these forums from Pavan at CCCS, claiming that they have special dispensation from the OFT to do so. Now, do you think that is true or not? I defy anyone, CCCS included, to show me a link, or press release from the OFT that confirms it. Looked hundreds of times for it personally, strangely never found it.

I don't doubt that OFT "turn a blind eye" but that is not the same as having special dispensation is it?

As another poster on here is fond of saying, that's just my take on it anyway.

Depth_Charge

Hi

What a very interesting thread

Well, it looks like some of the comments are directed at yours truly, but that is no problem and they are accepted with no offence taken whatsover, in fact I like it, its the way we all learn. I am pretty confident too that the two previous posters will not be in any way surprised by my response here.

These are deadful figures in my opinion, they cant hide from them and it is good to see a sensible debate even if things do get heated at times which they inevitably will do, but nothing wrong with that in my book

The subjects discussed on this thread need airing in my opinion as there is definitely a problem with affordability and sustainability issues for those already in both formal and informal debt solutions and those facing choices on how to best deal with their debts.

Anybody seriously involved in debt advice and no doubt many people and families facing debt and financial problems know whats going on and they know it could get a lot worse.

The idea when entering a debt solution is to be able to manage, feed and look after the kids, get to work, be able to deal with unexpected costs and emergencies and eventually become debt free, not to struggle, have to beg an IVA or debt management provider to allow more money to live on or repair the boiler, car, washing machine etc. etc

The danger is that safety and health could be compromised if we are not careful

The expenditure allowances have to be realistic and sustainable at the outset, more flexibility is a must for unexpected costs and emergencies or how the hell are people supposed to get through.

There is a push for a universal approach to expenditure figures, this seems strange to me as I thought we already had one, why is there such a variation in expenditure figures between the CCCS ones and the Common Financial Statement, then there are the HES figures that seem to come somewhere between from where Im standing.

Debt Workers have to be able to advise on a consistant basis how can one agency advice one set of figures against another that are significantly lower, it is nonsense and leaves advisers open to client anger, complaints and maybe even the wrong or less appropriate solution being advised

Advice agencies and advisers are supposed to be independent and impartial, the Common Financial Statement allows this in my opinion although I accept there always has to be a degree of flexibility.

I have to be fair (despite what some of the fee chargers may think, I always am) with my views and opinions here and therefore have to say that I have big concerns about the CCCS guideline expenditure allowance figures especially coming from a free advice agency who does not use them and take note there are many others I know saying the same, not sure about this guys you may have grossly miscalcuated.

I have noticed that CCCS have stepped in on a thread or two just lately and therefore I would not mind if they gave an opinion or two or justification even on some of the points I have raised on this open forum

The fee chargers seem to be having a go at me here, nothing new in that either:), but they have had years to sort things out so it makes me smile a little reading some of the comments. There have been problems with IVAs for years and they are failing all over the place often leaving people in a mess minus thousands in fees and what have they ever really done?

Disposable incomes are plummeting with uncertainty affecting people, stress and worry leading to health and relationship problems even when some of them are in a debt solution that is supposed to aleviate all this and set them free from debt.

It cant go on, just look at the IVA failure rates and behind all these will be an individual story, peoples lives.

It is a very difficult period and the concerns, issues, problems, worries and questions wont go away, they will just get louder until they are sensibly adressed.

Something has to happen

Looking at some of the fee charger job adverts though, what can you say?

My take

GD2_2

I rarely disagree with you (much) DC and I would never call into question your desire to help. However, you are still a little myopic.

Your tone is still anti IVA, whatever you may say, the phrase "have to beg an IVA or debt management provider to allow more money to live on or repair the boiler, car, washing machine etc. etc" whilst undoubtedly true from where you sit, and in fairness true, to a point, in reality is not balanced out by clarifying that the guidelines for IP's are set by CCCS and their chums. I have said it before, but I will repeat agin, that if you don't tow the line with CCCS then creditors reject. Guess what happens then? Why, never ending DMP's and incredibly fat commissions for a creditor funded "impartial" agency. Is that what you are seriously suggesting? I think of myself as fair too, though you may disagree, and I note your nod towards "problems" with guidelines later on in your post, but that really isn't sufficient, and doesn't name CCCS as the culprits. I am happy to do so though. Let me assure you that nothing would give me greater pleasure than to be able to burn CCCS guidelines and use CFS instead.

It is also a little unfair to suggest that fee payers have "had years" to sort things out. When you have one hand tied behind your back because the vested interests dictate that you cannot help people out of debt quicker unless you dance to their tune, then you end up where? Why, with a CCCS commission based multi year DMP of course.

I applaud and am slightly jealous of your ability to use CFS in your proposals, but what you don't make clear is that in doing so, whilst undoubtedly more affordable, you have lessened the choice of the debtor by either long term DMP or BR/DRO. You don't make clear, as far as I can see, that you cannot provide IVA's, nor do you make clear that in the, by your own admittance, rare occasions where you do recommend it, that you will refer to CCCS for it!!! With fees, which of course are the enemy, unless you go to CCCS apparently. At CCCS guideline levels as well of course. If that is the case, are you as culpable/responsible as the others that you denigrate? Accepted that it isn't personal by the way so no offence taken either. IVA's were introduced as an alternative, and to blame the providers for the greed of creditors/CCCS is again very short sighted.

I expect you to bring profit from the arrangement back into the argument as well, and that is fair, but asking which debt advice organisation in the UK is the most profitable, again for balance, would also be a good place to start with that particular debate. I wonder if anyone can guess who it is yet?

Depth_Charge

GD

You have set me a fair task here answer wise, well done, impressive post full on.

The style is a little familiar, base line direct, I cant think where you have picked up this type of approach.

A lot of content so I have to think a little, no time tonight now though, but I will come back to you, but that wont be a surprise me thinks.

No offence taken at all and thanks for the compliments (they were compliments weren't they?:)

GD2_2

Yes, they were.

I admire anyone with a passion to help, which you clearly have, even if I see the same problems from a different viewpoint. The annoying thing on here, from most people anyway, is that there seems to only be one acceptable view, and if you don't tow that line then you must be wrong. Can't be right to make that sort of assumption, whichever side of the fence you are on.

debt_doctor

An interesting thread and a great example of how to have proper debate without upsetting anyone.
I certainly would not refer any of my clients to CCCS for anything. You will note that they do not appear in my signature. Absolutely right that I should say that there are many well meaning folk within CCCS, but are only able to help within the CCCS ethic.
A CCCS representative visited our bureau some time ago as they were trying to set up a direct referral system from us to them for DMPs.
Whilst watching the publisher slides go by on the screen, something caught my eye that the representative didn't speak about.
I called out " Could we just go back to that last slide, to see what I think I saw"
.....and there it was "we operate a repayment ethic" -" and what does that mean?" i enquired.
We were told it was making people pay who could pay, indeed another publication of CCCS states " we are not there to look after the "won't pays".
Now in the big scheme of things in the general publics eyes, this may be a fairly moralistic point of view, but as a debt adviser (CCCS) that claims to be impartial I find it appauling that they should take such a stance, because the continuing conversation clearly showed that;

Clients with spare income were far more likely to be steered away from insolvency (especially bankruptcy) and in to a long range DMP.

Someone who could become bankrupt (with a fairly hefty IPA on the cards for 3 years) would most certainly be 'steered' in to IVA or DMP.

The other issue of course is the CCCS guidelines, which tend to nail people to the floor for years on end. The CFS is indeed a far better long term approach method of calculation.

The representative left after we informed that we could not accept their "repayment ethic" and we have never sent anything their way.

It does rather annoy me that CABx across the country DO refer to CCCS for IVAs and DMPs when they operate an ethic that is alien to CAB principles and that they do not use the CFS.

The few IVAs (and it is very few) that we refer out, are to an independant, local, private Firm whom we believe are excellent, and yes they are a profit making company. They also provide specialist insolvency solicitors, and helpful free consultation to us.

DD

Depth_Charge

GD2 wrote: »

I rarely disagree with you (much) DC and I would never call into question your desire to help. However, you are still a little myopic.

Your tone is still anti IVA, whatever you may say, the phrase "have to beg an IVA or debt management provider to allow more money to live on or repair the boiler, car, washing machine etc. etc" whilst undoubtedly true from where you sit, and in fairness true, to a point, in reality is not balanced out by clarifying that the guidelines for IP's are set by CCCS and their chums. I have said it before, but I will repeat agin, that if you don't tow the line with CCCS then creditors reject. Guess what happens then? Why, never ending DMP's and incredibly fat commissions for a creditor funded "impartial" agency. Is that what you are seriously suggesting? I think of myself as fair too, though you may disagree, and I note your nod towards "problems" with guidelines later on in your post, but that really isn't sufficient, and doesn't name CCCS as the culprits. I am happy to do so though. Let me assure you that nothing would give me greater pleasure than to be able to burn CCCS guidelines and use CFS instead.

It is also a little unfair to suggest that fee payers have "had years" to sort things out. When you have one hand tied behind your back because the vested interests dictate that you cannot help people out of debt quicker unless you dance to their tune, then you end up where? Why, with a CCCS commission based multi year DMP of course.

I applaud and am slightly jealous of your ability to use CFS in your proposals, but what you don't make clear is that in doing so, whilst undoubtedly more affordable, you have lessened the choice of the debtor by either long term DMP or BR/DRO. You don't make clear, as far as I can see, that you cannot provide IVA's, nor do you make clear that in the, by your own admittance, rare occasions where you do recommend it, that you will refer to CCCS for it!!! With fees, which of course are the enemy, unless you go to CCCS apparently. At CCCS guideline levels as well of course. If that is the case, are you as culpable/responsible as the others that you denigrate? Accepted that it isn't personal by the way so no offence taken either. IVA's were introduced as an alternative, and to blame the providers for the greed of creditors/CCCS is again very short sighted.

I expect you to bring profit from the arrangement back into the argument as well, and that is fair, but asking which debt advice organisation in the UK is the most profitable, again for balance, would also be a good place to start with that particular debate. I wonder if anyone can guess who it is yet?

Hi GD

Thanks for the compliments and I hope you respect this post, its a serious debate that is set to go on here and elsewhere me thinks

Anyway, here we go..

You are very much entitled to your opinions but I totally disagree that I am anti IVA its just a case of telling it as it is based on genuine experience and reading what you have put it would appear to a certain extent you actually concur.

Just for the record again IVAs can be the right solution depending on circumstances and of course choice.

I stand by my comments on begging for more monies and will go further as to say that in my opinion it is a disgrace that after entering a debt solution people are still struggling especially where the basics are concerned. This should not be taken as a blanket statement but are you telling me that it does not happen, are you telling me that people dont have problems contacting their providers and getting adjustments and breaks to their payments.

A point worth remembering is that these IVA termination figures are not made up, not invented, exaggerated, they are up on the Insolvency Service website for all to see.

You talk about towing the line, well to be honest this sounds like a lame excuse, this has been going on for years, show me where the debt management & IVA companies have ever really raised the issue. Have DEMSA & DRF ever really made a real noise about this?

It is no real excuse to say that if you dont tow the line then the creditors reject, aren't you more or less admitting then that arrangements may not be affordable and sustainable, do you tell clients this. The adverts and websites dont seem to mention anything, so who is really guilty here, who are the real collaborators?

Its no use crying wolf now and blaming others, its been going on for years, the difference now though is that is the unprecedented crash in disposable incomes, rising cost of living along with cuts, job lossess etc. The signs have been there long enough though and now its biting hard, hold on tight, it could get a lot worse yet. Maybe the visions have been clouded by the commission, marketing, sales and profits, but it is clearly rapidly decending upon us now, damage limitation time perhaps.

The IVA termination figures are really appalling and behind everyone there will be as story.

How many people ever see their IP or caseworkers face to face, how many people in IVAs ever get to speak to their IP even by telephone, It could be said that they are another world away from the pain, misery and stress of those in debt and when the IVAs fail, who sorts out the mess?

There are exceptions to the above I know, with full credit and respect where this applies

I have done 4 bankruptcies only this week all of which were failed IVAs and of course these will be added to the figures as I suspect will many more. All these 4 people have paid thousands in fees with very little returned to creditors. All basically back to square one less thousands in fees with the mess having to be picked up by another agency, the same agency that keep getting accused of having waiting times and lists, so come to the fee chargers you will get dealt with quicker!!

Yet I have read that there are certain IVA providers that have termination percentages in single figures, so somebody must be doing something right that has to be a fact. But of course simple mathematics would then suggest that there must be companies that have much higher percentage terminations than the I/S figures.

Why dont the IVA companies publish their termination and arrears figures as we keep hearing about these so called review tables and they must have them, what are they scared of, come on DEMSA and DRF tell us the truth.

I mentioned in my last post that I have big concerns with the CCCS expenditure alllowances and invited them to comment, I will again here.

The variations between guideline figures will be become a big issue I believe and in my opinion CCCS could leave themselves open to serious scrutiny as to their impartiality with time the great leveller as always.

I hope to be speaking with them direct soon so we will have to wait and see.

It is not really about lessening the choice it has to be about affordability, sustainability and more so now flexibility. The Common Financial Statement CFS) is recognised industry wide it is used and promoted by CAB, MAT, IMA, amongst others including the MALG guide to mental health and debt advice...

http://www.malg.org.uk/debtmentalhealth.html

There is no point in putting people in plans with inferior figures that only result in failure or taking much longer to complete anyway. This is where the financial interest & profit comes in again, what happened to independence impartiality, its a dead ringer again.

Isn't one of the real issues here that if agencies and companies use the Common Financial Statement (CFS) then it will affect their business plans and profits or why else do they not use it as I thought they were supposed to be acting in the best interests of their clients, at least use it as a safety net and if people genuinely wish to pay more and they can afford it they can, its the flexibility thing again really.

http://www.cfs.moneyadvicetrust.org/

Make no mistake though if anyone seriously thinks that all the fee chargers and profit makers will be going away then they are deluded, debt levels are too high and advice provision is needed. Also IVAs and other insolvency matters are administered by proffesional Insolvency Practitioners and thats not going to change either. Also at the end of the day people should always have the right to choose, I have always said that and nothing has changed there.

The problems are getting worse and the balance has to be restored or people will start to give up the struggle in trying to pay, basically returning to the situation as it was before they sought help, the danger is then that the whole thing will fall apart, the signs are clearly there, you only have to look at these appalling IVA termination figures to see this.

Maybe the charities, free providers and fee chargers should consider getting together, maybe look at improvised solutions like formal debt management plans, not going to happen though is it, we have tried it before, we end up on opposite sides of the room pointing the fingers at each other over the agencies sat in the middle:). Where the driving force is profit, then never the twain shall meet, shame really as we could make such a difference at a time when it most needed, well, we can live in hope I suppose.

As for the most profitable agency, I have my suspicion as to who you may refer, I don't honestly know, but I imagine the answers are out there somewhere, be careful what you wish for though.

Just to end I was wondering if you have seen a very recent article from Insolvency News - Business Minister confirms Insolvency Review - timing or what.

http://www.insolvencynews.com/article/14691/corporate/business-minister-confirms-insolvency-review

Its been a long one GD, a little toned down from the original, I hope you respect and appreciate, Im quite sure that you will to be honest

My take again

Comments welcome, but one at at time please:)

debt_doctor

A truly excellent post Depth Charge.

I think it is fair to say that the few, and I firmly believe that it is only a very few, of those IVA providers who operate in a fully genuine impartial manner, pay the price of being 'tarred with the same brush' as the, in my view, much larger in number, rogue operators.
DEMSA, makes me laugh out loud in a cynical way when I see failed DMPs and IVA apparently set up by those who follow the OFTs strict code of guidance.
The OFT should not allow their logo on alleged DEMSA compliant company websites because it looks like the OFT endorse these companies, when infact it is just the company claiming to follow the code and getting an advertising freebie via the OFT.

I'll continue to use our local private company who is not a DEMSA member, who does follow the straightforward IVA protocol, who adheres to the CFS and allows us to be personally present at the interview with our refered client.

DD