Different strokes for different folks

Trawling the internet also throws up delicious nonsense. A news alert on posts referring to 'IVA' came up with the Indiana Volleyball Academy. Might be a team playing in the unregulated leagues, made up of insolvent players and owned by investors in the debt industry.

Just goes to show that you can't put a good acronym down.

Clear Debt.co.uk report drop in IVA business

Following last month's report from Price Waterhouse Coopers that the numbers of people taking up IVAs seems to be falling, this now seems to be reflected in trading reports.

Sharecast now report IVA provider Cleardebt saying that the last six months have been a testing period for the IVA industry as creditors put pressure on IVA providers to return a higher proportion of the debtor payment.

Sharecast quote the group as saying that: "Fortunately for ClearDebt, our flexible business model means we are able to offer what we believe to be the lowest cost IVA currently available and have not been failed by creditors on a fees basis".

Their claims about fees do seem to be borne out by their web site which sets the 'entry level' for IVA debtors at £7,500 rather than the mimimum £15,000 debt which seems to be the profit threshold for most of the IVA factories but The Manchester Evening News nonetheless reported that shares in Manchester-based ClearDebt slumped to a year-low after it posted interim operating losses of more than £450,000.

If this is another indicator that the IVA market is being squeezed, at one end, by creditors and, at the other end, by debtors put off IVAs by recent bad publicity then the competition for the business of wary and better informed debtors can only increase.

It will therefore be interesting to see if this leads to reductions in fees and improved service or even more aggressive marketing and increased mis-selling from a small number of major players trying to maintain their market share.

IPA supports new IP-lite

Financial Director report that the Insolvency Practitioners Association (IPA) has become the second insolvency practitioners licensing body to move towards creating a so-called ‘lite’ qualification for people focused only on the UK’s rapidly expanding debt management industry.

According to the report, IPA chief executive Nick Sabin said the move is another step towards better policing of the much-maligned debt management industry, following the IPA’s recent appointment as the body charged with regulating the newly formed Debt Resolution For

Sabin said the proposal, which was made to the DTI, is crucial in managing the huge number of IVA proposals effectively. Upcoming changes to the IVA process will make them quicker, easier and simpler to undertake.

He is also quoted as saying:

‘Limited licensing is in that same spirit. A number of practitioners could think it would devalue the brand, but the growth in personal indebtedness means it has become an industrial process, and I can’t see this reducing in the near future. In the interests of all, we need some specialism.’

According to the report, Sabin believes that managers within accounting firms handling vast numbers of IVAs on behalf of an IP would be ideally placed to take the qualification.

‘An IP acts as nominee and supervisor for several hundred debtors, but the tier below them is manager level – some of whom have 20 years of experience as managers. They’re interested in a limited license as they can’t get a full license without corporate work'.

Whose fault is this ?

For years, junior staff and managers with lower level entry qualifications have been encouraged to take the Certificate of Proficiency in Insolvency (CPI) exams. According to the R3 careers brochure, the exam is designed for staff for staff working full time in insolvency who 'do not necessarily intend to become licensed insolvency practitioners'.

The brochure says the exam is a basic test of insolvency competence and consists of a single three hour paper but questions on personal insolvency only account for approximately one third of the marks and corporate insolvency about two thirds. It would have taken no great effort from the IPA to introduce a certificate of proficiency in personal insolvency for the managers specialising in this lower prestige work.

There are also no industry-wide recruitment standards which makes achievement of the CPI qualification essential for the personal insolvency managers who currently carry out the work of 'supervising' IVAs on a day to day basis. That could be a first step but using an 'IP-lite' qualification as a relatively quick - five year ? - conversion route to creating hundreds of licensed personal IPs will not address the problem of regulation.

Sabin said that managers in accounting firms handling vast numbers of IVAs would be ideally placed to take the qualification but accounting firms do not handle the work of the IVA factories and most of the problems with the "much-maligned debt management industry" are caused by the initial mis-selling of IVAs, not by the day to day management of the arrangements once they have been sold.

IP-lite might well increase the membership of the IPA and it might also improve the professional standing of personal insolvency managers but it sounds as though Sabin is proposing IP-lite as a solution to a problem that it cannot resolve: the commission based sales advisors who are actually selling IVAs and the already qualified insolvency practitioners who are signing off that process.

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See previous posts on IP-lite and The Debt Resolution Forum.

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New bankruptcy forum launched

Creditman are reporting the launch of a new bankruptcy advice site and bankruptcy forum by the organisers of IVA.co.uk, the UK’s biggest online community for information and advice about Individual Voluntary Arrangements.

BankruptcyHelp.org will be operating alongside the seemingly well subscribed bankruptcy board on Martin Lewis' Money Expert site and the bankruptcy forum on the Myvesta site but any new initiative that might do something to counterbalance the aggressive sales activity on the IVA front has to be welcomed. It certainly provides some antidote to our report on adviser recruitment in Manchester.

As the new site develops and the forum attracts members it will be interesting to see how the independence of the new site is maintained. The forums on IVA.co.uk are well supported by practising experts - including a very experienced independent IP - who volunteer their own time to provide advice but commercial providers can also post on the site.

Both Thomas Charles and their parent company Accuma are, for example, contributors to the site and although their online advice seems to be objective there is at least an enlightened self interest in their regular association with the site. It will be interesting to see if the less lucrative field of bankruptcy advice attracts similar expertise.

'Debt Advice' recruitment boom in Manchester ?

It looks like demand is booming for 'debt advisors' in Manchester. A recruitment consultancy called Corebusiness are currently advertising for IVA/Debt Advisors for a number of their clients. Not just one client !

clipped from jobview.monster.com

Debt / IVA Advisors UK-NW-Manchester

Apply Online

We have a number of clients seeking people who have a telesales or customer service background in finance. You will be responding to enquiries and selling the benefits of either a Debt Management programme or an IVA. You will be an excellent communicator and have the determination to succeed and earn a high salary

Additional Information. Location: UK-NW-Manchester
Salary/Wage: 16,000 - 18,000 GBP/year Bonus OTE 28k

The Corebusiness advert is interesting because they are recruiting 'debt advisors' but there is no requirement for any experience or qualification in debt counselling and advice. The emphasis is on candidates able to sell either DMPs or IVAs to achieve the commission based earnings quoted in the advert.

The companies selling IVAs need salespeople to maintain both profits and market share but the industry is trying to regulate 'debt advisors' through the new Debt Resolution Forum. It seems unlikely that sales targets and the linked sales-related earnings can be reconciled with the need for objective debt counselling that the regulators want to establish.

Surely the ideal counselling skills and the objectives of the 'regulators are just too far apart from the realities and objectives of the debt industry for the Forum to work ?

Trapped.co.uk and Your Clear.com

Some web sites pop up on google that are only intended to lead to other sites. Anyone searching for debt advice might, for example, stumble across infobloggs which then lead to an article called Could an IVA Help You Out of Your Debt Crisis? placed by a company called Trapped.co.uk.

The article reassures uninformed debtors that:

"Many people see IVA’s as an easy way out of their debt. However, this is not strictly true. Often, companies only allow you to take on an IVA if you are really struggling. With so many people in debt, they need to know that you are truly in need of help. So, if you are just about getting by but you would like extra help, an IVA may not be for you. It is only if you really, honestly cannot afford your current repayments that certain companies will help you."

The fact that IVAs have anything to do with insolvency and are intended - in appropriate cases - to provide an alternative to bankruptcy is not mentioned.

Duly encouraged, debtors might then follow the link to the Trapped.co.uk web site where their headline blurb says that IVAs are: "formal agreements that could see up to 95% of your debt written off".

This claim is clearly in breach of Office of Fair Trading (OFT) guidelines and although Trapped also seem to offer advice on Debt Management Plans, IVAs and Consolidation Loans there is no indication that they have a consumer credit licence.

It is only by ferreting around in the Trapped terms and conditions that we can discover they are owned by a company called Net Basic Ltd who claim to simply act as an online information source.

They say that none of the financial information featured on the site or accessed as a result of a link displayed on the site is intended or considered to be financial advice offered by Net Basic.

As they are clearly providing debt advice and (according to their own terms) taking commissions from the sale of financial products, the OFT might disagree with this claim, Netbasic nonetheless admit that they are not authorised by the Financial Services Authority in relation to the supply of advice in relation to financial products.

Debtors seeking help are unlikely to dig this deeply into the site and are more likely to complete the online 'debt option' calculators which provide the valuable sales contact information that can earn potential commissions.

For debtors who may be seeking IVAs, the Trapped contact information shows that their IVA enquiries are referred to Your Clear Ltd and loan consolidation enquiries to Central Capital Ltd

The Your Clear site makes less extravagant claims about IVAs saying - in common with many providers - that debts can be reduced by up to 75% and they also clearly say on their site that they work with business referral partners.

The payment of commissions for referrals is not mentioned although these costs must inevitably be written into the final fees charged for setting up and supervising IVAs - but Your Clear are still only another agent in the process. They are not the end of the food chain.

They are not listed as an IVA provider on the IVA.com web site and they are not listed on the Insolvency Service database but this is not unusual.

Your Clear act as advisors and according to their information on IVAs they carry out the preparatory work before the proposal for an IVA is passed on to a licensed insolvency practitioner. They do not say who that might be.

This is also not unusual - although it is unusual for Your Clear to claim that they handle applications for interim orders and the filing of IVA proposals with the courts. Only licensed IPs can do this.

Debtors could enter at any point along the sales food chain and might, unknowingly and accidentally, even make direct contact with the IP who would end up supervising their IVA.

If this happened would the eventual nominee & supervisor's fees be reduced by a sum equivalent to any referral fees or commissions that would otherwise be paid along the way ?

Unless the IP is also a solicitor regulated by the SRA - see the previous blog entry on this issue - the answer to this question might not be straightforward because there is no general requirement for the IP to declare the payment of referral fees to either debtors or creditors.

There are also problems because the trail followed here is not exceptional.

False or misleading claims made online by agents or referral sources can lead debtors into the IVA process and misinformation is like a rolling snowball. Some will always stick.

Somewhere behind or at the end of this commission-based sales food chain there are also licensed IP who remain anonymous throughout and can also deny any responsibility for the claims that have persuaded debtors to engage them as supervisor in their IVAs.

How can anyone say that this a properly regulated process ? If corporate insolvencies were either sold or dealt with on this basis it is a safe bet that a statutory regulatory regime would have been put in place by now.

ClearStart.org

Q. When is it The National Debt Helpline ? i.e. The national debtline charity.
A. When it is Clear Start running a Google Ad sponsored link claiming to be a National Debt Helpline.

Still Misleading ?

clipped from www.google.co.uk

National Debt Helpline
National Debt Helpline
Government Insolvency Act can clear
personal debt over £20k for £200 pm
www.clearstart.org