Lenders in IVA 'rogue' loan abuse
Unscrupulous lenders are abusing their power over problem debtors to force them into expensive 'consolidation loans'.
They are refusing to approve individual voluntary arrangements, an alternative to bankruptcy under which part of a person's total debt is written off.
The lenders then use their knowledge of people's financial troubles to try to sign them up for a master loan, which not only charges high interest but is also sometimes secured on a debtor's home.
'It is not illegal, but in my opinion it can sometimes be immoral,' said Peter Sargent, a council member of R3, the insolvency practitioners' trade body.
One senior insolvency source, who wished to remain anonymous, said: 'This is an abusive creditor practice.'
But for ruthless creditors there are three big advantages - quite apart from the obvious fact they do not have to write off any of the money owed.
First, they can charge more for a consolidation loan. Second, they can try to secure it on a debtor's home.
And third, unlike an IVA, it will not have to be listed in the lender's accounts as a problem loan.
Sargent, a partner with insolvency firm Begbies Traynor, said: 'My advice to anyone in trouble is not to borrow any more money.'
British Bankers' Association executive director Eric Leenders urged anyone with debt problems to take free, impartial advice from credit counselling services or Citizens Advice.
Last year there were 44,332 IVAs in England and Wales compared with 20,293 in 2005.
Source: thisismoney.co.uk
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