The backlash against firms specialising in setting up controversial schemes which allow people to renege on the bulk of their debts could result in more casualties, according to a leading figure in the sector.
Debt Free Direct, one of the largest providers of Individual Voluntary Arrangements, delivered doubled full-year profits of £9.4m, but only after a difficult second half.
Chief executive Andrew Redmond, who was forced to warn of lower profits during the year, said a number of competitors had disappeared and he would not be "surprised if further fallout occurs". He said "Our own trading in the second half has been impacted by increased competition, creditor reluctance to accept IVAs, and consumer unease caused by alarmist press coverage."
DFD is cementing its position as the market leader by mopping up one of its rivals, Clear Start, for nearly £11m in an all-share deal.
DFD condemns misleading TV advertising which tempted people with large debts to apply for IVAs in the belief most of their borrowings would be written off.
Companies such as DFD are paid an up-front fee of anything up to £7,000 for setting up an IVA. But following protests from banks and other creditors, payment will now be based on the amount the customer agrees to pay back.
The prospects for IVA specialists is unclear, but the broker Numis thinks DFD, with a strong pipeline of cases on which it continues to earn fees, "is best placed to emerge as a net winner post the expected shakeout".Reuse content