Dear Madam or Sir,
Article "A dangerous liaison for debtors?" by Julian Knight in The Independent on Sunday April 20th 2008.
http://www.iva.co.uk/forum/topic.asp?TOPIC_ID=11280
Frances Walker was referred to and quoted in the above article as follows "But Frances Walker from the Consumer Credit Counselling Service, a debt charity, is one of many critics who think that taking out PPI on an IVA is a waste of time. "I doubt creditors would want you spending money that should be going to them to repay your debts on insurance premiums. People who can't meet their IVA payments should go back to their IVA provider and ask them to renegotiate with the creditors."
Please pass my open letter to Frances. As you will see from the heading of this e-mail, I have already sent a copy to the author of the article.
An open letter to Frances Walker of the CCCS.
On behalf of the Consumer Credit Counselling Service you expressed the opinion to The Independent on Sunday that taking out PPI on an IVA is a “waste of time”, and you supported this by saying “I doubt creditors would want you spending money that should be going to them to repay your debts on insurance premiums. People who can’t meet their IVA payments should go back to their IVA provider and ask them to renegotiate with the creditors”.
Who thinks that Payment Protection Insurance is a “waste of time” ? It can’t be the Creditors, they have been one of the largest sellers of PPI in the past, often rolling up 5 years premiums and adding this to make the loan even bigger. A major part of the unsecured debt that comprises an IVA can often be Single Premium PPI sold by a Lender. Luckily for Lenders who have mis-sold PPI, in these situations people in IVA’s are rarely minded to invest the time and effort in pursuing recompense and damages, because these would not be paid to them, but to their creditors.
You say “People who can’t meet their IVA payments should go back to their IVA provider and ask them to renegotiate with the creditors”. What about the thousands of IVA’s that preclude Variation during the first 24 months - the months during which the greatest adjustment must be made because of the lifestyle changes that are so vital for the success of the IVA ?
Your own CCCS Website states that “Over-indebtedness largely results from a change in financial circumstances, caused by reduced income or overuse of credit, although relationship problems and changes in employment status are also common causes.” Many of the reasons for over-indebtedness listed, are in fact the very situations in which PPI provides protection.
As to the point that PPI premiums reduce creditor repayment, this is complete nonsense. When an IVA is negotiated between an individual and their creditors by an Insolvency Practitioner, their Income and Expenditure Statement will contain an agreed allowance for sundry expenses - creditors allow that this is to be used at the individual’s discretion - so why not for PPI ?
After all the person within the IVA is the only party to the IVA that does not receive a financial benefit from any PPI claim. PPI, by protecting the individual’s IVA payment does not put any cash into their pocket - an IVA payment comprises of only two elements - Creditor Dividend and Insolvency Practitioner Fees. PPI protects both of these, and demonstrates the individual’s determination to fulfil their IVA obligations. Surely this should be commended, not discouraged.
Look at a typical scenario of a self employed craftsman. He probably did not set out determined to run his own business, but ended up doing so because of lack of employment prospects. He was trained in his craft, not trained to run a business. For whatever reason he ends up in an IVA. He makes the necessary difficult lifestyle changes, and disciplines himself to find say £400 per month for his IVA - but he can only do this so long as he does not suffer an illness or injury. He is concerned that either of these could stop him working, and stop him from paying his IVA, so he decides to spend £13.00 per month of his sundry expense allowance not benefiting himself or his family, but protecting his IVA payment, protecting the Creditor Dividend and Insolvency Practitioner Fees. Who has the moral right to say he is wrong to do this ?
Finally, your own CCCS’ Website states “The Consumer Credit Counselling Service is a registered charity whose purpose is to assist people who are in financial difficulty by providing free, independent, impartial and realistic advice.” How do comments like these “assist people who are in financial difficulty” ? Further, if CCCS provide free services - how come they charge Grant Thornton half the Nominee Fee for "assistance" provided in the preparation of a statement of affairs, and what happens to that money? As the Nominee Fee for a “TIX Compliant” IVA is either 4 or 5 times the monthly IVA payment, this can be quite a considerable sum of money.
We should applaud people who accept that they "own their debt", and who try to repay as much as they can, rather than take softer options. Thousands of people who have no major asset like a house to forfeit in Bankruptcy, steadfastly refuse to follow professional advice to take that course, and battle on month after month, denying themselves luxuries, and making the IVA payments they promised to make - because THEY PROMISED TO MAKE THEM.
These people deserve our respect and admiration.
John Tegg.
Director.
DMS Agency Services Ltd.
Administrators of Protect IVA, Protect-a-Debt, and Protect-a-Trust-Deed.
