Scammers turn to 'mis-sold IVA' letters

People with IVAs are being besieged by scammers, suggesting the IVA was mis-sold.

For the past few years we’ve constantly warned our individual voluntary arrangement (IVA) clients about scam letters that try to take advantage of people with IVAs.

We’ve heard lots of stories of IVA clients receiving ‘mis-sold IVA’ letters. These letters usually inform them that they’ve been mis-sold the debt solution and that the company can either help reduce payments to creditors or “get the debt written off” to be “debt free sooner”.

You can view a mis-sold IVA letter (PDF) sent to a client of ours in 2010. The company behind the letter had its consumer credit licence revoked by the OFT last year.

It’s telling that these letters, sent out in bulk, can somehow assume an individual IVA was mis-sold without seeing or reading the IVA proposal. Unsurprisingly it’s rubbish.

What are they trying to sell?

When someone’s subject to an IVA their name and address is listed on the insolvency service website. As this is a public register of insolvencies, it means anyone can access the details. On a regular basis we hear about fee-charging ‘companies’ taking advantage of this access for their own ends.

These companies write to IVA clients and use scare tactics to try to get the client to fail their IVA as they’re selling a service like ‘assisted bankruptcy’ (we’ve talked about these before: the firms that charge £600 to fill in a bankruptcy form).

Going bankrupt currently costs a total of £700 in fees; £175 to the court and £525 to the Official Receiver. These companies are trying to get the person to go bankrupt so they can charge fees on top of this for filling out the forms, irrespective of whether it’s the best solution or not.

Most IVA clients who receive these scam letters don’t realise what service they’re being tempted by and on a few unfortunate occasions we’ve known people who’ve failed their IVA after taking advice from these companies, only to later realise that bankruptcy is not in their best interest.

What should I do if I get a letter?

If you’re on an IVA and receive a similar letter, remember that your name and address is on a public register. It’s also important to remember that the companies sending these letters are completely motivated by profit and are often neither legitimate nor properly registered to give financial advice.

Take everything the letter says with a very large pinch of salt and get in touch with your IVA case worker if you’re concerned.

We’re a competent authority on insolvency and we look at a person’s full financial circumstances before recommending a solution.  We also have a dedicated bankruptcy team that can assist in everything - including filling in the forms - for free. There’s never any need to pay for debt advice or ‘assisted bankruptcy’ and don’t be tempted by a letter in the post, or a cold call.

If you’re on an IVA and receive a letter like this we’d recommend that you ignore it and “file it in the shredder”. Or better still, forward it to us and we’ll try as hard as possible to stop this sharp practice.

More on debt:

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What happens to your foreign debts if you go bankrupt in the UK?

The real result of PPI mis-selling

When money saving doesn't actually save you money