Julian Knight: Morally speaking, IVA firms are just as bad as payday lenders


Personal Finance editor

The annual Independent on Sunday brass neck award is heading the way to something called the Debt Advisory Centre. The firm, which states that it is “currently helping 70,000 clients get out of debt”, used the Government’s announcement of a cap on payday lending rates to rail against high-cost credit. It stated that the number of its clients taking out payday loans and then falling into debt difficulty has doubled in the last two years.

 Nothing surprising there, you probably think, but it got me thinking about the way in which payday lenders have become the consumer Aunt Sally – second only to energy companies – to have any old stick chucked at them.

In this instance, the firm behind this research – despite its name, which makes it sound like a  charity – is in fact a peddler of individual voluntary arrangements.

These firms make a living from persuading people in debt to sign up to partial or full debt repayment programmes from which they earn commissions and fees.

 IVAs have long been a bugbear of mine as they often don’t lead to people getting out of debt but simply forking out for a service they could get from a free debt charity.

Is this morally any better or worse than say a lender that offers you £100 for a month but expects you to repay £130 all set out clearly for you to see in black and white?

I have major issues with payday lending of course and support an overhaul of the sector, but it can’t be simply put out of business  because frankly people have a right to access short-term credit.

And in all this noise and opprobrium being directed at payday lenders we mustn’t lose sight of what else is wrong in our financial services sector, such as IVA  providers for instance.

Mortgage support withdrawn

The plug has been pulled by the Bank of England as far as its £80bn funding for lending scheme being used to provide money for household lending.

Instead the intention is now to turn the FLS super-tanker around and head towards more lending to business.

We definitely need this change because although the FLS has been a success – it is no coincidence that the economy started to grow when the scheme was unveiled – it has been very unbalanced.

Although fuelling household debt does make us feel better, it will also only suck in imports if our businesses can’t grow fast enough to meet renewed demand.

Businesses tell me on a daily basis that they are being starved of cash, and loans that are offered are done so with ridiculous strings attached, including owners with many years of healthy accounts being asked to put up their homes as collateral.

The big question, though, is whether the banks will now be as  willing to tap the FLS to use for business lending as they were for mortgages and consumer credit.  If it was such a great deal surely they’d have done it already?

In this one question could lie the sustainability of the economic  recovery. However, the withdrawal of FLS will probably mean that banks have to compete for savers’ cash again and that should lead to more competitive rates.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Editor-in-chief - Financial Services - City, London

    £60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Guru Careers: Management Accountant

    £27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

    Guru Careers: Project Manager / Business Analyst

    £40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

    Day In a Page

    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'
    Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

    Flesh in Venice

    Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
    11 best anti-ageing day creams

    11 best anti-ageing day creams

    Slow down the ageing process with one of these high-performance, hardworking anti-agers
    Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

    Juventus vs Real Madrid

    Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
    Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

    Ashes series looks a lost cause for England...

    Whoever takes over as ECB director of cricket, says Stephen Brenkley
    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power