IVA firms agree to revise fee structures
Providers of individual voluntary arrangements (IVAs) on Thursday agreed to spread their fees out over several years in response to pressure from Britain's major banks to restructure their charges.
Debt management providers, intermediaries and creditors agreed at a meeting on Thursday to set standard guidelines for the structure of fees, advertising and advice that is offered to people seeking debt relief.
The agreement follows a surge in the number of people taking out IVAs, which allow people to write off some of their debt and pay the rest over a few years in agreement with an IVA provider. But creditors have criticised some providers for taking too big a fee, advertising irresponsibly and not offering the best advice to people.
Thursday's agreement is likely to see fees charged by IVA providers spread over the period of the arrangement rather than mostly paid at the start of the IVA.
"There's an agreement in principle to recalibrate that structure but now we have to get a bit more detail," said Eric Leenders, executive director of the British Bankers' Association, which co-chaired the meeting.
The changes are likely to be introduced over the next six months, Leenders said.
He said the idea of setting a standard fee for an IVA was not discussed.
Banks such as HSBC have clamped down on how much they will pay IVA providers in recent months and Capital One, the U.S. credit card provider, said from next week it will no longer pay more than 4,500 pounds for each IVA.
Providers receive an average of about 7,000 pounds per IVA, according to industry estimates.
There were over 48,000 individual IVAs in the year to the end of March, up over 80 percent from the previous year, but growth has slowed this year.
Shares in IVA firms including Debts.co.uk and Debtmatters Diret have fallen sharply this year due to the harder line by creditors and slowdown in industry growth.
Source: reuters.co.uk
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