Many UK banks rejecting IVA applications
Rising levels of consumer debt in the UK have resulted in a large number of people falling behind with repayments and last year saw the number of people becoming insolvent break the one hundred thousand barrier for the first time. As a result of unmanageable debt, many households and individuals have applied for IVAs, which are individual voluntary arrangements, and if successful these can reduce an individual's debt by up to seventy five percent in many cases, and typically the arrangement lasts for around five years based upon an affordable repayment for the applicant, which is then split between the different creditors.
Over the past year a wide range of IVA specialist companies have started to advertise on television and radio, offering consumers a simple 'solution' to help them to get out of debt more quickly. Many consumers that are laden down with debt have been tempted by the advertisements and have sought assistance through these companies, and this has resulted in a boost in the number of IVA applications and a massive leap in bad debts for banks and lenders.
As a result of the dramatic increase in bad debt many banks are now coming down harder when it comes to IVA applications. In order for an IVA plan to be approved there must be a majority vote in favour of the IVAs from the creditors, and with many banks now refusing to agree to these plans many applicants have found themselves having to find an alternative solution to manage their debts.
One spokesperson from Debt Free Direct, which also deals with IVAs and debt management stated: 'It is apparent that changing creditor criteria for acceptance of an IVA, whether justifiable or not, is having an impact on case conversion. They are now failed early in the DFD process, rather than letting them fail at Meeting of Creditors, because of particular creditor preferences. An increased incidence of case failure and, more particularly, case adjournments, have led to a slow down in the growth in run-rate of new IVAs.