Morning All,
I have after a full week received a reply to my letter to my IP regarding my challenge to them over my fees.
They have denied that there is anything wrong with them, but have admitted 'there are weaknesses in the narrative' which have been recorded in the time analysis.
They have made a derisory offer to write off the remaining fees they have not already paid themselves 'as a gesture of good will' - this is about £1800, BUT they have added £1000 more fees since my last letter AND will want the costs of the time taken to complete my IVA if I settle up by the end of the month!. - so I will be no better off.
Here is the interesting part - they have not answered properly or at all any of the points I have raised in my letter to them.
Below is the main points of their replies and what I actually put in my letter to them is included below for comparison. -
(1) They disputed the amount of £19,583 in time costs as this is not correct - I actually wrote that this was the costs of the IVA, not specifically their time costs. (and if you remember I have stated several times on this forum that their fees were now approx 16K plus nominees fee of 1.5K)
(2) They say that I have made the comment that costs incurred for banking, cashiering, filing, file and case reviews, and annual reports are internal administration and should not be charged. - I have said no such thing in my letter but queried why they were running at 1K/year when the whole IVA was supposed to only cost about 5K
(3) They say they do not accept there are significant amounts of time charged for new supervisor work and changes of staff, and could I give them specific examples - I did not say that the charges were significant, just wrong
(4)They do not accept my comment that their costs for dealing with my IVA over the last 6 years are 'bordering on the ridiculous' - no explanation though of this comment
(5) They made the point that I was wrong when I said that their charges were under £2,000 in 2005 and over £4,000 in 2006, but that they were actually £2,200 and £3,825 respectively (Thats all right then isn't it ? - still no explanation for the nearly double increase though and I will check my maths but I am sure I am right)
(6) They made the point that their hourly rates are subject to annual review and that they fail to see what the opinion of the original court judges has on anything - I pointed out they never charged at the rate they told the court they would
(7) They say the supervisor change was under a court order and that any charges were not excessive (I never said they were excessive, just that I shouldn't have been charged them)
(8) They say the time costs spent in respect of case reviews are all properly chargeable and that I suggest in my letter that they should not charge time for reviewing files and case progress - I never disputed case reviews are chargeable, just excessive as they charged me the following in the last 4.5years (didnt add up first 1.5yrs)
2003 : £175
2004 : £342
2005 : £584
2006 : £1,059 !!!!
2007 : £504 so far
(9) They do not accept that I have been charged with regards staff changing - there are a few clear entries in their time analysis which are for this
(10) They do not accept that basic secretarial work has been carried out by senior staff - there are some clear entries in the time analyis for this
(11) They do not accept that time has been charged for correcting mistakes made - there are several clear entries in the time analysis for where someone has checked someone else's work
(12) They make again the point about case reviews being necessary from a compliance requirement point of view and that contrary to what I claim these are not internal or administration matters. - I never claimed that all case reviews are internal matters, and the only reason I have lumped them together with the admin is because that is what they have done in their time analysis - they are under admin!!!
(13) They again admit that there are 'weaknesses in the narrative which have been recorded in the time analysis' but that they do not accept that they have billed me unneccessarily for time properly spent in administering my case.
This is 95% of the letter they have sent me and below is the actual letter I sent them, you will see clearly that they have failed to answer properly or at all any of the points I raised with them. They have not made any references to amounts, or increases ,or disproportionate costs at all.
Dear Sir
Thank you for your reply to my letter of the 4th May and the time analysis you have supplied. I acknowledge that the original estimate of £3,200 was for a three year IVA and not five as I put in my letter.
However on a pro rata basis that would give rise to costs of approximately £5,000 plus the nominees fee of £1500, giving a total of £6,500 for the five years and the proposal.
Your current costs are some £19,583 a significant increase on the original estimates.
The main reason you have given for the costs rising were the additional work involved in dealing with HMRC above what you may have expected, and also I freely admit that at times I have struggled to keep up with payments and required paperwork, but the costs are way out of line with the level of work that you have had to do on these issues.
Having studied every entry on your time analysis and extracting every one that applies to me, my creditors, the court, my solicitors, any entries marked without info (£900) any marked just 'letter' near to other entries to creditors etc - absolutely anything that I can see that is not clearly and directly down to yourselves - I have even included all the references to the annual report work in here, these total costs for all this work are £5,712 give or take.
(This does not mean that I agree with all these entries, or that they may be all that is
attributable to me or the creditors, rather they are my best stab at extracting the information) - but I can't be that far out. (eg there could be an entry for 'case review' which is as a result of something that has happened - if there is then it has not been marked as such)
This leaves £13,871 in administration - consisting of banking, payments to yourselves, filing, file reviews, case reviews, agents fees (2006 so not to do with initial proposal), new
supervisor work, change of staff, computer work, internal investigations etc.
Bearing in mid that your initial estimate should have been about £6,500 for the whole process, this figure just for administration appears to me, to be bordering on ridiculous.
Even taking into account any adjustment in my calculations above, there is no way that you can get administration down to anything near a justifiable amount. I have looked at the
figures and while I do not doubt that these charges were applied in good faith, I am amazed that no one at Armstrong Watson has questioned them, particularly when my IVA was extended to meet your fees.
In your letter you comment on the time taken in the earlier years in dealing with the
government departments, but that doesn’t explain how your costs for 2005 were just short of £2,000 but your costs for 2006 were over £4,000 - this is not exactly a small difference, and is a good indication of why I have had concerns over your fees.
The costs directly attributable to paying your own fees and general banking issues amount to approximately £1,000 per year and would have swallowed up most of the original estimated fees on their own.
I have listed on the next page some of the general and some specific issues I have with your fees as laid out in your time analysis.
General Points With Regards Fees :
The original hourly rate in the proposal was £45 - £90 hr, but just a few days after
approval the fees started being applied at £110 hr - The supervisor was on £180/hr after
4.5 yrs, double that of the original proposal, and he had lots of case reviews!
While it is perfectly possible that your hourly rates went up 22% in a few days, I wonder what the original court judge who refused the initial application because you did not supply any hourly rates would have though of that.
The costs for installing a new supervisor to my IVA has been charged to me - ie costs of
paperwork and banking work for changing the supervisor - and of course 'case reviews'. This is ‘internal’ administration and should not have been charged to my IVA.
The costs for change of staff has been charged to me - meetings between old staff and new staff to hand over files and discuss these files has been charged to me. This is also ‘internal’
administration and should not have been charged to my IVA.
The bank accounts keep changing and the costs for changing the accounts has been charged to me - this is not acceptable.
Basic secretarial work has been done by senior practitioners/managers etc on massive hourly rates when they have been done by secretarial staff in the past on low hourly rates - I don't mind who does the filing, photocopying and bank statements etc but I expect to be charged at the lower rate for secretarial work not the higher!
Mistakes by IP staff and errors in paperwork have been investigated and corrected by other members of staff, and then the cost charged to me. This is internal administration and should not be charged to my IVA.
Some Examples Of Individual Items Of Concerns.
I asked for copies of some invoices and you then posted me some and charged £72 for doing it, then you phoned me to tell me you had sent them and charged me £10 for the call.
When the new supervisor took over, the bank phoned you because it wanted his passport or driving license for authorising access to bank accounts - this cost me £22.50
You spent £50 checking and re-issuing one of your own invoices which you didn't pay yourselves correctly.
One member of staff checked to see if another member of staff had posted a letter - this cost me £13
There is an entry where a cheque for something was refunded and the cash book corrected - this cost me £52
One member of staff on £125/hr had 7 case review meetings in 3 months in 2006 at £12.50/time and the Supervisor on £180 had 7 case reviews in the preceding 6 months at £90/time - at no other time throughout my IVA has there been anywhere near this level of case
reviews.
Just as an example of costs of admin I took June 2002 at random -
11/06 - Inv Payment/Cash Book/Filing - £21
11/06 - cheq/invoice - £11
14/06 - Banking - £11
17/06 - Contribution - £7
18/06 - Banking - £11
19/06 - Banking - £7
21/06 - Banking - £11
26/06 - Banking - £11
Total of £90 in one month in 2002 at random just for banking.
The above points are just some examples of why your fees have escalated well beyond what I would consider reasonable or just.
I fully accept that there were extra costs incurred by yourselves caused by extra work dealing with HMRC and myself, and I have no problem with paying for these, but the level of your fees are way above what could be considered reasonable and I think the time analysis you have sent me along with the points I have made above form a fairly compelling case to be referred to the financial ombudsman.
I am prepared to settle this matter amicably as I accept that your costs did go up and I suggest we meet somewhere in the middle. I am sure it would be better to sort this out between ourselves rather than go through a lengthy and probably costly investigation of your fees.
As you are aware I am behind with my payments and struggling because of your fees and I feel that it would only be fair for you to agree to adjust your fees to reflect what should be a fair price for running an IVA with only HMRC and Barclays as the creditors.
Your original estimate was for £1,000/year running costs, and having looked at current prices for IVA’s I can see that costs are running at approximately £600 - £1500 per year
depending on the complexity of the IVA. My IVA is not complex, but if we took the upper figure x 5 (the proper term of my IVA) that would be £7,500, plus the nominees fee of £1500, plus £4,000 to cover any extra work, that would come to £13,000 some £6,500 less than your current charges, but also £6,500 above that which you originally estimated. (based pro rata on your original £3,200 estimate).
This would wipe out any further liability to myself and should result in a 75p/£ payout for my creditors, and reimburse yourselves for the extra work you have had to do.
I have been advised that this a very fair offer and that I should pass onto the ombudsman the details of this letter in advance of any investigation request. I will wait a few days to give you chance to respond however before I do so.
Sorry for the extremely long post, but it is important that you see both my letter and their reply as fully as possible.
It is interesting that their case of fees going up in the early days were down to HMRC, but that they have made no reference to that in this letter, and that they have bot given a reason as to why their costs are so high, just that they think they are justifiable.
Is it me ? - 5k to 16K - justifiable?
Chris.
