The OFT is watching

Monday 25th January 2010

By Andy Moody, managing director of TCF Debt Solutions

The question of what represents the best option for clients in debt is still not one that is debated openly in the market. With so many so called debt firms offering a one size fits all solution because they offer just one choice, it is probably hardly surprising that there are vested interests in not wanting to make any waves.

Back in December, the Individual Voluntary Arrangement (IVA) Standing Committee issued its review of the IVA Protocol, which set out to assess the impact of the protocol on debtors, creditors and debt solution providers since its introduction in 2008. The voluntary code offers a standardised approach to dealing with a debtor’s income, expenditure and interest in property and provides a better framework to avoid unnecessary modifications. The amended version of the Protocol will help to further reduce delays.

What is interesting is that while the number of IVAs is increasing and the access to entry is being simplified, the debt solutions industry still seems unwilling to offer a universal acceptance of the need to ensure that clients understand all the options available rather than just one.

The OFT has voiced concerns that some advisers are moving clients from one solution to another as a cynical fee earning exercise. 80 per cent of clients coming to IVAs are likely to have tried another form of debt solution and clearly the OFT is right to investigate this, because it highlights the need to choose a provider that offers genuine ‘whole of market’ debt advice, so the best and most appropriate solution can be found at the outset, not after other solutions have expensively failed.
 
The Protocol has helped to simplify access to IVAs and as a result IVAs are becoming more popular. They offer a highly effective debt solution for those with debts in excess of GBP 15k and over GBP 200 of disposable income and they are also regulated.

However, the important thing to remember as an adviser, is to avoid the ‘off the peg’ and look for a bespoke solution, whatever it be. The OFT and any future regulator will expect nothing less.

Andy Moody is managing director of TCF Debt Solutions and has spent his career in financial services, with particular emphasis on businesses working exclusively with an intermediary focus.