Debt Advisers In The Firing Line Again!
While there has been an explosion in Individual Voluntary Arrangements (IVAs) over the last few years, many analysts believe that the cycle may have peaked in the short term. This situation was reflected in the recent fall in share prices in the sector, with warnings that growth would slow from the unrealistic rates of last year.
IVAs are the only real alternative to bankruptcy, allowing creditors to receive some form of repayment from the individual, although they have been very very lucrative for Debt Advisers who receive fees in the region of £8,000 for each arrangement.
The fees charged are covered by the individual’s creditors, who appoint legal representation to collect payments, etc. In many cases the fees paid to Debt Management companies have been more than the actual funds received by creditors!
There has been talk for some time about a realignment of the fee situation, although the banking community will look to push through a ceiling of £4,500 per case, which is a massive fall from the highs of £8,000 per case. This proposed scaling back is much more than expected and sure to cause yet more concern about the future levels of profitability for Debt Management companies - and likely to result in yet more share price falls.
While IVAs have been a realistic alternative to bankruptcy for some time, many IVA customers are looking to move towards full bankruptcy, after struggling with the often crippling repayments. This in turn has prompted many to look towards bankruptcy as a first option, thereby exerting more pressure on the Debt Management companies.
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