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New protection for IVA customers

The government has set out a new code governing Individual Voluntary Arrangements (IVAs), a controversial alternative to bankruptcy.


The government said the protocol should ensure that:


debtors will be asked to detail their income and outgoings in a standardised financial statement

insolvency practitioners will carry out more stringent checks on income and mortgage repayments

debtors will be encouraged to try to reach an informal agreement with their creditors before being recommended for an IVA

there will be an agreement as to when debtors will be deemed to have failed to meet the terms of the IVA, should they get into arrears with monthly repayments.

a lender who rejects an IVA proposal will need to give a specific explanation for the rejection.

The government added that the operation of protocol would be closely monitored and reviewed by a standing committee.

Can i ask the experts if this will make a diffrence to people like hsbc having this 40p rule ? as lenders will have to give an explanation to why they are rejecting...

Thanks

I think that eventually this will have an effect on hurdle rates, but this will not happen overnight.

What is to stop a Creditor giving something along the following lines as a reason for rejection -

"Given that the debtor has failed to satisfactorily manage their account in accordance with the terms and conditions previously agreed by them - we are not satisfified that they will now comply with the requirements of the IVA for the specified duration of the arrangement".

Would this be an acceptable reason for rejection - it would be hard to argue against it if the debtor has missed payments or gone over-limit? I know that the IVA payments are set at a manageable level but then so were the credit card payments when they started!!!!

Sorry if I am being a devils advocate!!!!

There would be nothing to stop a creditor doing that, but at the end of the day BBA members have also signed up to the protocol and accepted that in the majority of cases an IVA is the best way for them to recover their debt and rehabilitate their customers.

At the end of the day, a creditor can still reserve the right to reject a proposal. However, if the creditor is a member of the BBA it provides a channel for the lodging of a complaint, or at least requires the creditors to give reasons. The devil is in the detail, however, as whilst a general overview has been circulated to the profession, we have not been circulated with, for example, standard terms which at the beginning of this month had not been finalised. I would hope that the standard terms will create a level playing fields in a number of areas, some of which are burning issues on this forum, to name but 2 as examples, variations and review clauses.

The overall tone does, however, seem to be on the positive side. The apparent intention is that if a debtor, who is making a genuine attempt to repay his or her debts, asks an IP to produce a protocol-compliant proposal, then it ought to be approved with minimum fuss and (dare I say it) with few if any modifications. Once the details have been circulated (I hope R3 and my licensing body will do so today) I will know a bit more.

Ian

Edit: From Melanies post elsewhere I see they have been issued by the DTI. The areas I refer to above have indeed been addressed!

The meeting was very positive yesterday Ian, I don't know if you were invited, but I came back with a very warm feeling about the way forward. It will remain to be seen whether the bank's completely embrace the protocol, but I spoke to a number of bankers yesterday who did seem positive and we are definately moving towards the creditor agents agreeing to agree which has to be good news!