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Debt advice charities raise concerns about bad practice by IVA providers

Written by: Emma Lunn
The Money Advice Trust and StepChange Debt Charity are calling for action to protect consumers from dodgy IVA lead generator companies.

The call came in response to a consultation by the Joint Insolvency Committee on amendments to professional standards.

The charities say the changes proposed by the insolvency industry do not go far enough to protect financially vulnerable people from harm.

They are particularly concerned about the practices of lead generation companies that Individual Voluntary Arrangements (IVA) providers pay for referrals.

The charities are calling for the Insolvency Service to develop stronger rules for insolvency practitioners who accept referrals from lead generation companies.

The Money Advice Trust and StepChange pointed to examples of misleading online adverts for IVAs by lead generators on search engines including Google.

These adverts often impersonate advice charities and can mislead people seeking help and use their data. The ads also often make misleading claims about IVAs.

The charities warn that these harmful online adverts are incentivised by referral fees which lead generators receive from IVA providers and could lead financially vulnerable people into unsuitable advice and debt solutions that are not appropriate for their circumstances.

The Insolvency Service’s 2018 review raised questions about how the commercial relationship between lead generators and insolvency practitioners was incentivising inappropriate advice.

Since then, the proportion of IVAs failing to deliver people the help they need has continued to rise.

The charities say firms must be required to ensure that any leads they pay for are not the result of misleading or illegal online promotions by lead generators – an urgent first step in the much needed reform of the IVA sector.

Jane Tully, director of external affairs and partnerships at the Money Advice Trust, said: “We see on a regular basis online adverts that make misleading claims about ‘debt write-offs’ and that impersonate free debt advice charities. These ads direct people to sites offering IVAs that can lead people in financial difficulty down a route unsuitable for their circumstances, causing further financial harm down the line.

“At a time when household budgets have been hit hard by Covid-19, it is crucial that people are protected and able to easily access the independent debt advice they need.”

Peter Tutton, StepChange head of policy, said: “We appreciate that efforts are underway to improve the current inadequacies in regulation, but the risk in the current market is that many people in problem debt following the pandemic may prove easy picking for predatory IVA lead generators. This absolutely must be addressed urgently if vulnerable people are to be protected from harm.”

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