Chantelle, a 37-year-old disabled mom from the UK. Despite being a steadfast advocate, her past has been marred by a difficult path as she navigated the debt gauntlet after losing the ability to earn an income. As a result, in 2019, she needed to leave her job as a social worker due to her disability. This sudden change had a profound impact on her family’s economic security. Her partner had to become her full-time caregiver, a choice that irrevocably upended their financial stability. Her family’s income plummeted to around £1,600 a month.
Before her disability forced her out of work, Chantelle accrued £23,000 in debt, primarily from credit cards issued by major financial institutions, including Santander, Barclaycard, American Express, and HSBC. Desperate of finding a way out of her financial issues, she went online for assistance. From there, she was passed onto a company that introduced her to the IVA provider.
The IVA provider came up with an expensive solution – one that meant Chantelle would shell out £6,000 over a six-year period. With a DRO costing only £90, Chantelle could have cleared her debt swiftly and effectively. This lightweight alternative would have enabled her to pay off her debts in one year. Initially, the IVA made her monthly payments £90. The next week it went up to £100 because of the value of her car.
Over time, Chantelle started falling behind on her payments. Her IVA automatically extended to six years rather than five because of the value of her car. Even though she paid off £3,000 through paying in installments, most of the cash was swallowed by fees rather than chipping away at her debt. It didn’t help that her utility bills drained her income. They increased between £80 and £170 per month in the third year of the IVA.
In increasing despair, Chantelle turned to Citizens Advice for help. They walked her through the process of canceling the IVA. While the provider later agreed to accept a smaller payment of £65, even this was out of Chantelle’s budget.
Chantelle’s experience highlights a significant concern regarding the oversight of the IVA market, described as a “wild west” by StepChange’s head of policy, Peter Tutton. He also said that IVAs can actually worsen a person’s financial situation when poorly administered.
“If IVAs go wrong, they go very wrong. You don’t get the debt relief you signed up for, and … you’ll find that if you’ve paid £2,000, very little of that will have come off your debts, and you’re back to square one or worse off.” – Peter Tutton, StepChange’s head of policy
Chantelle’s story highlights the dangers that those who desperately pursue debt relief solutions are exposed to. She did not live an extravagant lifestyle, but she was dead set on encouraging her daughter’s passions. She created the opportunities that enabled her daughter to keep swimming and dancing.
“We don’t have a very luxurious lifestyle but I do pay for my daughter to do a couple of classes – she does swimming and dance. I didn’t want to have to stop them because I feel bad that she’s held back by having a disabled parent. I didn’t want to change her routine, and that was the only area that we would have been able to cut back on. Luckily, it didn’t come to that.” – Chantelle
Chantelle’s story should shed light on the issues with debt management solutions like IVA’s must be regulated and effective. As people head to these programs in search of saving their financial lives. Yet, at the same time, the industry is being held to a higher and higher standard of scrutiny and accountability.
The IVA market has recently come under significant fire, with advocates calling for wide-sweeping reforms that focus on protecting consumers. There is broad consensus that consumers in precarious financial situations need more protection. They deserve better from the very institutions created to care for them.