Debtwizard comment

I find it unbelievable that in this time when the economy is on its knees, the consumer is gasping for air and with a forecast of 3 million unemployed, the government, that professes to help the batted consumer, will turn its back on legislation to get borrowers back on a level footing with creditors.

The numbers of people being granted IVAs are down this year due to the pessimistic stance taken by creditors. Bankruptcy over the same period has risen by almost 12% and it is about time that the government did something to remedy this.

In the past 18 months the banks have tried to stop their customers setting up Individual Voluntary Arrangements. It is estimated that as many as 15,000 to 20,000 in 2008 alone have been prevented from proposing an IVA due to the demands being asked by the banks.

The banks are able to do this by setting up what is known as 'hurdle' rates for those applying for IVA’s. This is where they demand a high a percentage repayment back on the debts and thousands of individuals are simply unable to meet their demands.The reason the banks have done this is simple. Having a high number of IVA’s on their balance sheet is seriously bad for business and can have a negative knock on their share price. A ‘long term debt repayment programme’ does not show up on their balance sheet” It is estimated that there are some 750,000 individuals in these types of plans which offers no legal protection or debt relief to the borrower.

With the Government now controlling most of the lenders in the UK, it’s about time banks started to help the financial overstretched consumer and remove these hurdle rates. The actions by some banks and credit card companies also go against the BBA guidelines, (British Bankers Association), whereby a borrower with financial difficulty should be treated in a positive and sympathetic manner.

I argue that the recently formed protocol IVA, launched on the 1st February this year, which was designed to improve the older version of IVA is not working. Many insolvency firms tell me that creditors are not abiding to the protocol which is why they desperately need the new SIVA to help debtors.

It is evident that had this new legislation been introduced then those numbers successfully proposing IVAs would have dramatically increased. This now raises the question, is it right that desperate individuals should be denied this new and much needed piece of legislation simply to prop up a failing share price?