www.iva.co.uk

Hi all, I just want to get an input from someone to tell me whether I am totally misunderstanding the situation. So my original debt was around £13224, but Debt Free Direct calculated about 54p in the pound to be returned. After wage increase etc this increased to 100p in the pound so their fees and charges increased accordingly. Fine. However, I’ve had a few complaints upheld by the FOS and debts cleared, nil balances, closed accounts etc, all of which Debt Free Direct are aware of and have recalculated the dividends to reflect this. However, it seems that they haven’t changed their fees and charges to reflect the new figure. So I will pay back something in the region of £8500 to meet 100p in the pound. Their charges are still sat at the figure from the original full debt of £13224 (charges and fees are close to £8000 I believe). Below is an email I sent and I hope one of you expert types would be able to give me a clear cut independent response?

I refer to your statement: “Your creditors stipulated a realisation based rate and as the Supervisor’s fees are calculated as a percentage of receipts, therefore these will increase proportionately where further receipts into an IVA are greater than first anticipated, for example due to successful PPI mis-selling claims being pursue or windfalls being received."

As I see this, the percentage of receipts increased proportionately where it was realised I would be able to achieve 100p in the pound. This was calculated on the full original debt of £13224 (or thereabouts as I don't have the exact figure to hand.) The original fees in the proposal were calculated on an estimated receipt of £8681 as you stated. However, should the fees not also be proportionately reduced to fall in line with the new total realisation since around £5000 has been withdrawn from the creditors’ claims through closures following complaints and financial ombudsman instruction? I can see how the fees went up with the increased estimate, however I feel it is only right and fair that they go down to reflect the percentage being taken from the new final realisation, which is roughly the original estimated figure.

I do agree that without the Iva I would be paying more to the creditors than the dividends you are releasing to them, however as it stands I am paying almost twice as much between creditors and yourselves as the debt should be now the creditors’ claims have been dramatically reduced.“

Thanks in advance. I hope this doesn’t confuse you, but it certainly has the potential!

Steve

Fees are not connected in any way to the amount of debt. They are agreed as laid out in your Chairman's Report, either on a time charged basis or as a percentage of the amount of payments you make, in addition to a fixed fee for work done prior to the IVA starting. So recalculating the debt will not affect the fees (indeed, if on a time charge basis, it could increase them due to extra work involved).

Foggy wrote:

Fees are not connected in any way to the amount of debt. They are agreed as laid out in your Chairman's Report, either on a time charged basis or as a percentage of the amount of payments you make, in addition to a fixed fee for work done prior to the IVA starting. So recalculating the debt will not affect the fees (indeed, if on a time charge basis, it could increase them due to extra work involved).

Hi foggy, thanks for that.

So if they're worked out on a percentage of payments I make, they would have been worked out on the payments reaching £13224 originally, which has now changed so the payments I make will amount to about £8500. Will that not affect them?

On the face of it, yes. But, the withdrawal of some of the debts has not, as yet, reduced your payments, or those expected over the term. You will continue to make payments until the full debt is repaid, plus fees and also possible statutory interest at 8% p.a simple, so, depending on all the figures, you could still actually part with the same overall amount, just dstributed differently.

If the IP fees are based on a percentage of realisations then they may fall. The nominee fee will still likely be £1000 or the first five payments and the supervisory fees 15% of any further payments. Therefore, once sufficient monies have been paid into the pot for the creditors to be repaid in full plus nominee fee, costs and the 15% then I would assume your payments would cease then.

That would be my opinion anyway.

The first thing to do is check what their fees were supposed to be - fixed (and if so at what %, or time spent? or perhaps a mixture?)