In the early-to-mid-2000s, there was a large expansion of credit which coincided with a significant increase in the individual insolvency rate and, since the end of 2011, IVAs have been the most common individual insolvency chosen by consumers. When executed well, the IVA has the potential to be the most effective debt solution on the market – designed to help people through long, entrenched problems with their finances. Unfortunately, despite this potential, the IVA has faced criticism and consumer backlash.
According to a recent government report, the final months of 2018 witnessed the highest quarterly level of IVAs since their introduction in 1987. The personal insolvency sector must meet this expansion with robust regulation and more disciplined ways of working. We will only succeed when all stakeholders sign up; agents, creditors and practitioners must all feel confident about speaking out against negligence and poor case management.
Following a government review, the industry has taken a massive step forward by working with regulators to develop a voluntary framework around ways of working, as a forerunner to a compulsory framework currently being developed. This is a positive step and signals a commitment to rebuild trust between practitioners, agents and consumers.
A complete overhaul of the IVA protocols is arguably long overdue. As it stands, the IVA protocol is a voluntary agreement which provides a standard framework for dealing with straightforward consumer IVAs. Despite initial hopes, IVA protocols have proved inefficient. While IVA providers and creditors are expected to follow the processes agreed in the protocol, this rarely happens – leaving consumers largely powerless.
Ultimately, the industry as a whole has not worked hard enough to provide a good consumer experience. Countless examples exist of poor software being used to manage cases and outdated technologies and processes are all too common. In fact a third of IVAs break down – a far from satisfactory outcome for both consumers and practitioners.
The technology now exists to reduce the overall cost of administration, reduce the time it takes to facilitate IVAs, and increase the transparency and efficiency of the whole process. Yet stakeholders across the industry continue to use technologies and processes which are tired and tested rather than tried and tested.
Consumers commonly report feeling out of control when it comes to managing their IVA. In order to restore trust this issue needs to be urgently addressed. Insolvency practitioners have failed to re-design the IVA to meet a shift in demand away from complex cases concerning business-related debtors to a more consumer focused audience, in many cases resulting in a poor consumer experience.
Despite a host of talented individuals working within the sector, innovative thinking is currently being stifled. As we look ahead to 2020, the personal insolvency sector should look to modernise and develop to ensure absolute trust between stakeholders is restored. The whole sector must be part of the solution, all stakeholders must be involved and consumers should ultimately feel empowered and confident.
I believe in the IVA and its power to be a force for good for consumers; however, we just need to make a few adjustments to make it fit-for-purpose for consumers and for the viability of our industry.
Martin Prigent is a director at Vision Blue Solutions
