Consumers warned of mis-leading IVA promotions

Consumers have been warned about unsolicited mailings encouraging them to cancel existing individual voluntary arrangements (IVA) and opt for a debt management solution such as bankruptcy instead.

The Office of Fair Trading (OFT) says several firms have been accessing IVA customer information from the public register of people, and targeting them with misleading marketing material that suggests they may have been mis-sold an IVA. The literature urges consumers to instead consider taking bankruptcy – even though this might not actually be the most suitable course of action.

Is it misleading?

The OFT says unsolicited mail may be misleading if it fails to explain to people the consequences of terminating an IVA agreement and going bankrupt.

One consequence includes people seeing the money they paid to set up the IVA being used to pay for the insolvency practitioner’s fees rather than paying off the debt. In addition, bankruptcy has far reaching consequences on consumers such as losing control of your assets, potentially losing your home and facing restrictions in future borrowing and running a business.

So far the OFT has identified 12 businesses sending this sort of mailing, and it has issued them with warnings. Unless they amend any misleading claims within the next four weeks they could face fines or lose their consumer credit licences.

Ray Watson, director for consumer credit at the OFT, says: “Tackling companies who are engaging in unfair business practices by targeting vulnerable consumers with misleading advice and information, particularly if it leads to consumers becoming more over-indebted, is a key priority for the OFT.”

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