Wow, gobsmacked at 2014 IVA protocol!!!

scared-sick

Ok, so i have been asking questions on this forum regarding an IVA.
I have many helpful answers.
However, i received my IVA draft to go through and had an appointment today to ask any questions.

The protocol states:

'Remortgage includes other secured lending such as a secured loan'

My question is simple....what does this mean?

It turns out the question is NOT simple as this is what i encountered after asking the question:

Stepchange - gave me an answer which they said was 'industry recognised' as the interpretation.

So i thought i would test this and rang:

National debtline - they gave VERY different interpretation.

So i went for best of 3 and rang:

Payplan - they said they only DO IVA's not interpret them!
They suggested i ring:

Money advice service - they said they only offer advice and tried to refer me to stepchange so i said no, then they offered payplan so i again said no and explained why. They then gave me the number for:

Financial ombudsman - said they didnt know and referred me to:

The insolvency service - they didnt know so they referred me to:

The iva enquiry line - they didnt know so they referred me to:

The insolvency practitioner policy makers - they didnt know so they referred me to:

This was a name rather than a company so withholding it - they didnt know so they referred me to:

Another name - they didnt know so they referred me to:

THE PERSON ON THE WORKING PARTY WHO WROTE THE POLICY!!!
I then got an answer!!!

I kid you not, this is what happened and i was on the phone for over 2 hours!!

If all of these 'experts' cannot answer a simple yet vitally important question about a product they are 'selling' to people, then what chance has the likes of me got in making a life changing decision or even an informed choice!

What is even more scary is quite a few of these people offered me their 'opinion' on what the sentence meant. None of it fact!

This is a LEGALLY BINDING agreement!
Please someone sort this out!
Advice charities on here, i would be interested in your views on this?

People considering an IVA, please consider EVERYTHING!

I am astounded!!

rizla_king

Yes, seems it's now the policy to allow them to shaft you by insisting you take out a long term expensive secured loan that you will be paying for years upon years after an IVA should have been over.

longtermplanner

scared-sick wrote: »

THE PERSON ON THE WORKING PARTY WHO WROTE THE POLICY!!!
I then got an answer!!!

Well come on, we are all on the edge of our seats ... what was the answer????

I agree with you that this is a ridiculous state of affairs. If the industry doesn't sort it out then it is going to be increasingly difficult for any 'independent debt advisors' to be able to recommend an IVA to anyone with property.

And by "sort it out" I don't mean produce waffly stuff about affordability criteria, Anyone that has been in this industry for a few years will know how the interest rates on secured loans can sometimes rise significantly, so passing some affordability test in the 5 the year of an IVA may still mean that the client is saddled with an expensive nightmare loan for 10 years afterwards.

scared-sick

rizla_king wrote: »

Yes, seems it's now the policy to allow them to shaft you by insisting you take out a long term expensive secured loan that you will be paying for years upon years after an IVA should have been over.

Yes, this is true!
However, that wasnt the intention when the policy was wrote apparently!
They believed the 'safeguards' they put in place in the appendix would prevent this.
They dont of course!!

scared-sick

longtermplanner wrote: »

Well come on, we are all on the edge of our seats ... what was the answer????

I agree with you that this is a ridiculous state of affairs. If the industry doesn't sort it out then it is going to be increasingly difficult for any 'independent debt advisors' to be able to recommend an IVA to anyone with property.

And by "sort it out" I don't mean produce waffly stuff about affordability criteria, Anyone that has been in this industry for a few years will know how the interest rates on secured loans can sometimes rise significantly, so passing some affordability test in the 5 the year of an IVA may still mean that the client is saddled with an expensive nightmare loan for 10 years afterwards.

I was wanting to hold off with the answer to see if any of the agencies came back with any replies!

The scary part really though is, if it took me 11 phone calls then you can bet that whatever the definitive answer is, it is still open to interpretation.
Depending who you choose for you iva will mean very different things in 5 years time when this sentence kicks in i can tell you!

rizla_king

The truth would rightly put any sane person with a house off an IVA, so anywhere with a vested interest is unlikely to admit the truth. On the other hand, people who don't sell IVAs probably haven't twigged on this con job yet, so they may not realise either.

mother_hen_2

Can I just commend you on your tenaciousness -how frustrating it must have been..

UpToMyNeckInIt

Worrying how much of the industry seems to be ignorant of this potentially very significant clause.

It is hitting brick walls like those that 'scared sick' mentions, which understandably leads to scaremongering speculation - plenty of it on this and other forums.

Quite right though that anyone who is a homeowner, contemplating an IVA, is aware of the equity release provision.

As an IVA customer with 2 properties, I have a vested interest, but am not too concerned (nor would I be if I were about to enter an IVA under the 2014 protocol), I think an IP (a very well regarded one at that), on another forum put this whole 'secured loan' provision into perspective:

'My own view is that this is a storm in a teacup, as the ability to get a secured loan based on the other restrictive criteria of the protocol - affordability, length of term etc will make it quite difficult for anyone to get a secured loan.

We have recently done a back review in my portfolio of cases where equity release is relevant over the last 13 months, and on only one occasion would it have been possible.

As an IP in practice, I have to work with what I am given, and if the Insolvency Service choose to amend the rules then so be it. Personally I don't see protocol DMPs growing at the expense of IVAs - but it is vitally important that clients be given the full facts to enable them to make appropriate choices at the outset.'

...I don't know if that statement puts some of you at ease, but at least it is a qualified, professional opinion from an industry insider.

It is perhaps a far better premise on which to base your initial concerns, rather than the 'every IVA/homeowner will get shafted' type rhetoric that we read a bit too much of.

Sure, secured loans will ensnare more customers than only allowing a total remortgage, but only a few I suspect.
It is also worth remembering that taking a secured loan for a relatively small amount, whilst keeping your nice low mortgage rate, will often work out cheaper than remortgaging your entire property debt at a sub-prime rate. So is it really worth getting into such a twist over it, when it could work to some advantage?

longtermplanner

UpToMyNeckInIt wrote: »

Sure, secured loans will ensnare more customers than only allowing a total remortgage, but only a few I suspect. [/FONT][/COLOR]
It is also worth remembering that taking a secured loan for a relatively small amount, whilst keeping your nice low mortgage rate, will often work out cheaper than remortgaging your entire property debt at a sub-prime rate. So is it really worth getting into such a twist over it, when it could work to some advantage?

The problem is that secured loans are variable rate and are not usually tied to bank rate or anything. Here is what Martin Lewis has to say about them http://blog.moneysavingexpert.com/2008/07/09/first-plus-closes-good-and-bad-news%E2%80%A6/:

" Unlike normal loans where the amount you pay is fixed at the outset, most secured loans have variable rates, and lenders can put them up willy-nilly. Many with secured loans have already seen their interest rates doubling and as there’s little they can do about it, it’s pushing some into crisis mode. Worse still, as these loans tend to be for huge amounts and spread over years, the pain is likely to last and last."

So any 'affordablility' test in the 5 th year of your IVA doesn't mean that the secured loan will still be affordable a couple of years later.

National_Debtline

scared-sick wrote: »

National debtline - they gave VERY different interpretation.

Hello there,

Our understanding that a 'remortgage' can include a traditional remortgage or a secured loan. Here's a link to our fact sheet which should coincide with the information provided by our adviser when you called: https://www.nationaldebtline.org/EW/factsheets/Pages/26%20EW%20Individual%20voluntary%20arrangements%20%28IVAs%29/Page-03.aspx#quicklink1

if you have any further queries, please don't hesitate to ask.

Best wishes,

David @ NDL.

UpToMyNeckInIt

...The trouble with MSE's 2008 'Secured loan' guide is that it is as out-of-date as their IVA guide.

By MSE's own admission:

'This article is substantially out of date and here for archive purposes only. The secured loan market may have changed substantially since it was written'.

As seen here: http://www.moneysavingexpert.com/loans/secured-loans

Fact is, there are fixed rate secured loans around. They also come with no early redemption fee, meaning that when your credit file recovers after 6 years, you are free to shop around for a cheaper product.

I know of one firm posting on another IVA forum offering these terms, and there are probably many others.

Fair point though about making sure you check your loan t's & c's. But I am reasonably confident that many IVA customers would not be eligible for a variable rate product, for the reasons mentioned here about not being able to guarantee affordable repayments (capped at 50% of what your IVA repayment was) if the rate was 'variable'.