Set up to fail: How the broken IVA market is failing people in debt distress

Set up to fail: How the broken IVA market is failing people in debt distress 3.16 MB

Our research shows how people in problem debt are being sold a debt solution - an Individual Voluntary Arrangement (IVA) - that too often is not the best option for them.

IVAs are heavily marketed to people looking for debt help and, despite being the most expensive and lengthy option, they have become by far the most common form of insolvency. 

We're concerned that too many people are being placed into IVAs without first being given impartial advice to ensure it's the best option for them. This is because pre-IVA advice is not regulated in the same way as other debt advice, and therefore does not provide good enough protection for consumers.

An unsuitable IVA can cause real harm. They can leave people struggling to make ends meet, being in debt for longer, or even going into more debt to make repayments.

We found that:

• 73% of people who are or have been in an IVA struggled to make repayments

• 46% had to cut back on everyday essentials like food and heating to make their IVA payments

• 39% said their IVA has had a negative impact on their debt levels

• 32% said they had to borrow money to make their IVA payments

We are calling on the Treasury to bring pre-IVA advice under the Financial Conduct Authority’s regulation, so it’s in line with other debt advice. This would ensure people only enter an IVA when it is the best option for them, and fewer IVAs would fail.