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Mortgage support withdrawn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; request a free guide on NISAs from Hargreaves Lansdown

News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
peopleReports that Brand could stand for Mayor on an 'anti-politics' ticket
News
The clocks go forward an hour at 1am on Sunday 30 March
news
Arts and Entertainment
The Doctor finds himself in a forest version of London in Doctor Who episode 'In the Forest of the Night'
TVReview: Is the Doctor ever going stop frowning? Apparently not.
News
Voluminous silk drawers were worn by Queen Victoria
newsThe silk underwear is part of a growing trade in celebrity smalls
PROMOTED VIDEO
Sport
footballMatch report: Real fight back to ruin Argentinian's debut
News
Candidates with surnames that start with an A have an electoral advantage
newsVoters are biased towards names with letters near start of alphabet
Arts and Entertainment
Isis with Lord Grantham (Hugh Bonneville)
TV
Arts and Entertainment
Jay James
TVReview: Performances were stale and cheesier than a chunk of Blue Stilton left out for a month
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Data Analyst/Planning and Performance – Surrey – Up to £35k

    £30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker