A controversial statement recently issued by the UK’s leading insolvency body, claims that lending institutions may have hidden agenda’s with regards to their condemnation of the IVA procedure.

According to the IP body R3, lending institutions are frequently rejecting IVA proposals in an attempt to force high rate consolidation loans upon indebted consumers. IVA’s allow seriously indebted people to propose a payment alternative to their creditors, allowing them to write off a percentage of their overall debt. However, many lending organisations have publicly criticised IVA firms, stating that the procedure is being forced onto consumers when far more practical alternatives will suffice. It appears that in this instance, the “practical” solution referred to, is in fact an even more expensive consolidation loan.

Representatives from the insolvency body have condemned such practices, as being “unethical” and “immoral” stating that lenders have a responsibility to consumers and forcing loans on to people through the refusal of an IVA, constitutes as abuse of their power. It is suggested that the primary reasoning behind voluntary insolvency rejections are two fold, first and foremost to avoid any potential losses that would result in the approval of an IVA, and secondly to make even more money through higher rates of interest tagged to a consolidation loan.

It is unanimously agreed that consumers cannot borrow their way out of serious debt problems, and we would advise any person who has been offered further loans as a means to escape debt, to contact a dedicated debt charity or consumer body before making up your mind.