Debt Resolution Forum slams banks

The Debt Resolution Forum DRF, representing 28 of the UK's debt resolution firms, has warned that banks and credit card companies have been setting out to frustrate effective debt resolution in the UK at almost any cost.

Commenting, DRF chairman, Chris Holmes, said: "Since January, the government's Insolvency Service, the British Bankers Association BBA, the DRF and other bodies have been working to create a protocol ostensibly to ensure over-indebted consumers have access to affordable, achievable and certain debt resolution through the IVA Individual Voluntary Arrangement procedure."

But Holmes adds that it's apparent that many important creditors have decided to frustrate this initiative with artificial barriers and hurdles that are denying debtors a sensible route out of debt. The BBA seems powerless to bring them back into the previously positive dialogue and the Insolvency Service is expressing concern that the lenders' approach may deny debtors access to a solution which is the best for them, and for their creditors.

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"Interest rates have risen four times since November; people coming out of fixed-rate mortgages this summer could see their monthly payments rise by 50% or more and UK consumers now owe more than £1,000 billion.

"But creditors are failing to heed the message that a debt crisis lies ahead unless they take action now to make effective, fair debt resolution a realistic option for creditors," he notes.

Holmes also says there is no evidence of any willingness by creditors to match an increase in value provided by the IVA companies with a willingness to accept IVAs, purely because they are achievable and affordable - and represent the debtor's best efforts to pay back what they owe.

Many smaller firms of licensed insolvency practitioners IPs, according to Holmes, will be driven out of the market, further diminishing the availability of effective debt resolution.

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"IVAs fell by 15% in the second quarter of 2007 not because demand is faltering but, we believe, because the conditions imposed on IVAs by the banks and credit card companies are leading to hundreds of clients, every week, being advised that an IVA is no longer possible for them," he says.

The DRF argues that, unless an effective new deal is reached; an explosion in bankruptcies is likely, which paradoxically, is likely to see creditors get far less from those who have been over-lent, or who have over-borrowed. A sharp increase in bankruptcies would also be likely to be more socially damaging and would not have the rehabilitative effect of an IVA, which forces people to learn to manage their money.

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2007-08-14 11:58:23 © Moneyextra.com