About this guide
For many people in the UK, debt is a fact of life. With rising costs across the board, from bills to everyday essentials, it’s harder than ever to stay on top of your finances.
Loans can allow you to make it through the month, or cover any unexpected urgent costs like home repairs. However, this means that more and more people are becoming caught up in the struggle to find sustainable methods of managing repayments.
An IVA (Individual Voluntary Arrangement) is a legally binding agreement between a person and their creditors that should make re-payments more manageable – and ensure that additional charges like interest are frozen.
For many people in debt, an IVA seems like the only way out. But in many cases, a different form of debt management would have been more appropriate – and the advice they received was wrong or negligent.
In recent years, thousands of people have been steered into IVAs that weren’t right for them. This wasn’t always accidental: many insolvency practitioners and debt-packaging firms had strong financial incentives to recommend IVAs over better alternatives.
This guide will explain what a mis-sold IVA claim is, how you know if IVA was mis-sold to you, and how you can make a claim yourself.
What is an IVA?
An IVA (Individual Voluntary Arrangement) is a formal debt solution aimed at people with unsecured debts (e.g. credit cards, loans, overdrafts) who can afford regular monthly payments.
As a legally binding agreement between you and your creditors, you will make fixed payments for usually around 5–6 years. Interest and charges are usually frozen and, at the end of the agreed period, any remaining eligible debt is written off.
An IVA is set up by a licensed Insolvency Practitioner (IP) and will be on the public record – it is a form of insolvency, so anyone who takes out an IVA will appear on the insolvency register for 6 years.
While it can ensure that debts are paid off, an IVA has a severe impact on your credit score – and will stay on your file for 6 years.
When is an IVA considered mis-sold?
As with many financial products or agreements, IVAs are complex: there are a whole lot of technicalities that can be misunderstood by people if they are not properly explained, who then end up in a much worse situation.
In June 2023, the Financial Conduct Authority (FCA) banned debt-packagers from receiving referral fees for IVAs, citing widespread evidence of mis-selling.
Key findings included:
- Referral fees of £940 per IVA case meant that there was a strong, and unethical, incentive to push IVAs.
- Some advisors manipulated income and expenses to make clients appear IVA-eligible.
- Cheaper alternatives like DROs (now free) were rarely mentioned.
An IVA may be mis-sold if it was recommended or set up without proper assessment, explanation, or suitability.
Common examples include:
-
It wasn’t suitable for your situation
If you couldn’t realistically afford the payments or your income was unstable (e.g. zero-hours work) a Debt Relief Order (DRO), bankruptcy, or informal plan would probably have been much better suited for your circumstances.
-
Key information wasn’t explained properly
If you weren’t told it would be public or the impact on your credit score wasn’t explained then you may have been mis-led. Same goes if you weren’t made aware of alternative options like DROs or bankruptcy.
Other essential details that some people are not warned about include:
- Missing payments could cause the IVA to fail.
- You might have to release equity from your home or extend the IVA.
- Fees and how much creditors vs. the IP would receive weren’t made clear.
-
You were mis-led or pressured
A hallmark of mis-selling is the downplaying of risks or exaggeration of benefits.
If you were pushed into an IVA quickly without time to consider alternatives, or it was presented as a “government scheme” (it isn’t), then it would have been mis-sold to you.
Same goes if you weren’t made aware of the high fees – and that much of what you paid may have gone toward supervision fees not your actual debt.
Your circumstances were not properly reviewed
With these kinds of financial agreement there are many important details that must be fully assessed and taken into account.
If things like health issues, benefits-only income, or dependents were ignored then it’s likely you have a case for mis-selling.
Another factor that would indicate mis-selling is if you were advised to take out new credit to “make the IVA work” – as this only increases the amount of debt you would be in, and thus counters the purpose of the IVA agreement, which is sustainable debt management.
What can you do if you think your IVA was mis-sold?
If you entered into an IVA before October 2023, there’s a chance you were mis-sold.
And if you were mis-sold, you could be entitled to a refund of IVA fees and payments (£2,000–£5,000+) or the debt relief you should have received much earlier.
Eligibility criteria
You may be eligible for a claim if:
- Your debts were under £50,000
- You had less than £75/month in disposable income
- Your assets were under £2,000 (excluding a car under £4,000)
- You were not properly informed about DROs or bankruptcy
There are some major IVA providers who have come under particular scrutiny, including:
- CreditFix
- The Insolvency Group
- Hanover Insolvency
How to make a mis-sold IVA claim yourself
You can make a complaint about mis-sold IVAs yourself, without using a solicitor. Here’s how:
Step 1: Complaint to the Insolvency Practitioner
If you believe you were treated unfairly or given misleading advice and want to make a claim yourself, rather than seek legal assistance, your first action is to submit a written complaint to the Insolvency Practitioner who set it up.
Letter template
Dear [name of IP],
I’m getting in touch to make a complaint about an IVA, which I believe was mis-sold to me.
[Add a detailed explanation for the ways in which you felt that the IVA was mis-sold. Include evidence of how it was inappropriate for your circumstances, how key information was not fully explained or the agreement has worsened your financial situation.]
Please find my details and information below, as well as evidence attached:
- My full name:
- DOB:
- Current address:
- Address at the time of agreement:
- Date of agreement:
This is a formal complaint: I request that you reply with written confirmation of receipt and give me a full response within 8 weeks.
If I do not receive a response after 8 weeks, I will escalate to the relevant regulatory body for independent review.
Kind regards,
[Your name]
Step 2a: Escalate to a regulatory body
If your initial complaint goes unresolved, you will have to escalate the complaint to the IP’s regulator.
IVAs are regulated in several different ways, depending on who was involved in setting them up and giving the advice.
All Insolvency practitioners must be licensed and are regulated by recognised professional bodies, such as the Insolvency Practitioners Association or one of the Institute of Chartered Accountants in England and Wales, Scotland, or Northern Ireland.
All of these regulators are overseen by the Government’s Insolvency Service, which ensures that they comply with the law.
Your insolvency practitioner should clearly state who their regulatory body is in their terms and conditions and/or on their letterhead.
Step 2b: Escalate to the FCA
The Financial Conduct Authority (FCA) regulates debt advice firms and debt “packaging” companies. These are the firms that often provide advice about IVAs or refer clients to insolvency practitioners. Many of these companies are run by, or closely connected to, insolvency practitioners.
This means there may be a separate and additional route of complaint where a debt advice or packaging firm was involved in recommending or arranging your IVA. Whether a firm is FCA-regulated should also be clearly stated in their terms and conditions or on their headed paper.
Letter template
Dear [Insert name of regulator],
I’m getting in touch to make a complaint about an IVA, which was mis-sold to me by [name of IP practitioner or debt advice firm].
I understand that you are the regulator and able to investigate complaints against the providers or promoters of IVAs. I would like you to log my complaint – as I believe the IVA was mis-sold to me and may be due compensation.
Please find my details and information below, as well as evidence attached:
- My full name:
- DOB:
- Current address:
- Address at the time of agreement:
- Date of agreement:
[Add a detailed explanation for the ways in which you felt that the IVA was mis-sold. Include evidence of how it was inappropriate for your circumstances, how key information was not fully explained or the agreement has worsened your financial situation.]
As well as logging this as a formal complaint, I request that you reply with written confirmation of receipt.
Kind regards,
[Your name]
How to get help
The complaint route for a mis-sold IVA will depend on who gave the advice and who actually provided the IVA services. In some cases, more than one organisation may be involved, making the process confusing and not always straightforward.
For this reason, if you believe your IVA was mis-sold or that you were given negligent or misleading advice, it can be helpful to seek advice from a legal expert or organisation who specialises in IVA and mis-selling claims. A specialist can help identify the correct route to take and improve your chances of achieving a successful outcome.
There are some key places to get free, confidential, independent advice on your IVA:
We also have a recommended provider of legal assistance who are experienced in large-scale mis-selling cases and group actions.
Hugh James provide an efficient claims process with a “No win, no fee” payments structure – so you won’t pay a penny unless the claim is a success. If you win, you’ll also keep the majority of any compensation
Start your claim
It only takes a few minutes to complete their online form. They will then review your case and let you know whether they can take it forward.