IVA minimum payment hikes
BANKS are blocking debt-saddled consumers’ attempts to get back on their feet — by hiking up Individual Voluntary Arrangement minimum repayment terms.
Lenders such as HSBC, Halifax, Bank of Scotland, First Direct, M&S Money, NatWest, Abbey and Royal Bank of Scotland became disgruntled with the industry standard of 25 per cent of the debt. Many now demand 40 per cent — or it’s no deal.
Official figures from the Insolvency Service show banks have already tightened the screws.
There were 10,239 IVAs in the third quarter of 2007, down 4.3 per cent on the previous quarter and by 14.3 per cent on the corresponding quarter of 2006.
This method of debt management peaked in the last quarter of 2006 at 12,645 IVAs.
But now, with the tougher repayment terms, many debtors are giving up the halfway house of an IVA and caving in to the last resort of bankruptcy, say IVA comparison website IVA.com.
IVA.com director Terry Balfour says: “We have seen the likes of HSBC and Northern Rock demand that borrowers settle an often unmanageable 40 per cent of their debt before green-lighting them for IVA solutions.
“Our concern is that many other creditors will now follow suit, forcing more and more people into the stigma of bankruptcy.
“Working up the courage to apply for an IVA is a big step. It provides a huge relief for people desperate to start again without the stigma of bankruptcy — not to mention losing their house and the pasting their credit rating will take.”
Britain has a growing £1trillion debt mountain and Debt Mediation Services, who act for consumers turned down for IVAs, now want the Financial Ombudsman Service and Office of Fair Trading to investigate the cartel of big creditors.
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