Current changes in the debt solutions industry equates to borrowers needing help and solutions finding it more difficult to get out of their debt burden. For the past months, as the credit squeeze becomes even tighter, institutions have supposedly firmed up their guidelines to approving Individual Voluntary Agreements.
Even though it is one of the common ways used to get out of debt, the number of IVAs agreed has been gradually and steadily declining even though the statistics say that there are more people getting into financial troubles, and there doesn't seem to be a slow down in site. For many people, the IVA represents the final resort before filing for bankruptcy but the Debt Resolution Forum states that credit card companies and banks are doing all that they can to block IVAs, unless they get both increased payments from borrowers and smaller fees from the debt solutions companies and the IVA providers.
In order to have an IVA granted, at least 75% of the creditors must agree to it, however, since banks have been recouping as little as 10% of their outstanding debt through IVAs, a large number of them have been refusing to accept the agreements. But, the financial institutions are fast to mention that they are not intentionally hurting the IVA process. IVA providers to this day are still charging what they call a specialist fee for what has become a very commoditised product. The cost of the average IVA is approximately $15,000. But we have reason to believe that it should fall to nearer $11,000 due to the lower administration charges now being incurred.
Hover disagrees with the DRF claim that the banking sector has rejected more IVAs claiming that approval rates are remaining steady at about 80%. But, in 180 degree contrast to the opinion stated by the DRF, TIX is under the impression that IVAs would be taken out by more over extended borrowers if there were lower fees. However, the pressure to reduce these fees are forcing debt solutions companies to also reduce their budget in place for advertising, and due to this they have seen a fall in conversion rates..
As a negative result, not only are they seeing their incomes decrease, many debt solution companies are concerned that good and honest advice about debt management is so scarce and hard to find for borrowers, and are pleading with the banks and credit card companies to thing again about their no prisoners attitude to accepting IVAs.
With over a quarter million people reaching out to the debt charity Consumer Credit Counselling Services since the beginning of the year, which is almost 25% greater than the same time frame last year, it is now increasingly obvious that there are several people struggling under the stresses of unmanageable debt. In order to help the people who are truly in need, the banks and the whole insolvency industry must come to a middle ground and find a solution.
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