What does the rise in insolvency last year tell us about the debt industry?
Debt solutions, however depressing it may be, will never go out of fashion.
However, with last year’s undeniably unpredictable behaviour causing havoc on many people’s finances, financial relief plans such as payment holidays have been put in place to help those struggling, meaning that debt solution companies are currently experiencing a delay in customers taking out solutions including bankruptcy and DROs.
Surprisingly, there has been an increase in the amount of IVAs taken out this year - but, with many of those in debt having access to financial relief for the duration of the pandemic, what do these figures really mean?
Whilst IVAs have risen by a small 0.5%, DROs and bankruptcies have both fallen by around 25%. So, how exactly, have IVAs increased, and more importantly, why?
Harjit Moore, Freeze Debt CEO, believes that the rise in IVAs is a reflection on the debt industrys’ struggle to stay afloat during the pandemic:
“It’s a strange thing to say, but like any other business, there’s money in debt.
IVAs, unlike DROs and bankruptcies, require debtors to pay off a percentage of their debt over a certain amount of time, which for many, is a more appealing option than having debt completely written off along with consequences of doing so.
IVAs also come with some set-up fees, which is how said companies make money, and therefore it wouldn’t be unreasonable to imagine that in tougher times, companies have been suggesting that a customer is best suited to an IVA rather than bankruptcy or a DRO.
It’s not surprising, but it’s also not ethical, and solutions should always be based on the personal circumstances of an individual.”
Whilst it’s understandable that the debt industry, like any other industry, needs money to continue trading, the misselling of IVAs to vulnerable customers in dire need of help and advice is immoral and unacceptable.
Harjit also called on the debt industry to change the way they work in order to better serve their customers:
“The industry is built on call centres, some who take leads from other sides of the world, and have no interest in the wellbeing of their customers.
That might seem like a bold statement, but the way that call centres work means that customers aren’t given the care and support they require. If a customer doesn’t have the right information to hand, the phone call ends; if they are ineligible for specific debt solutions, the phone call ends, and the customer is left in the same position they started in, with even more worry and anxiety around the future of their finances.
This is why I created the app - to better communicate with customers and make sure they have a constant network of support.”
It’s true that there is no one perfect debt solution, so IVAs could work well for some, however it’s time for the debt industry to redirect their focus and concentrate on the wellbeing of their customers, and move away from the notion that because an IVA works best for their business, it also benefits the customer.
If you’re struggling with debt as a result of the pandemic or struggling to find the right solution, visit the Freeze Debt website for more information about what we do, and how we can help you to find a debt solution based on your personal circumstances.
Or, download the app here: