When it comes to personal debt, you’ll often hear warnings about being careful who you borrow money from. But unfortunately, it isn’t always just unscrupulous lenders and loan sharks you have to be careful of. It’s important to be sure who you’re turning to for debt assistance, too.
By and large, personal debt advisory services, regulated as they are by the FInancial Conduct Authority (FCA) and Insolvency Service, are highly trustworthy and professional. But as in any sector, bad apples do slip through the net from time to time.
A recent case of four companies wound up by a judge ‘in the public interest’ – i.e. to stop them continuing their dodgy practices – highlights this. Vanguard Insolvency Practitioners Limited was described as a ‘volume’ Individual Voluntary Arrangement (IVA) provider, which means it acted on behalf of private individuals to arrange debt repayment plans with their creditors.
IVAs are a common mechanism used to help people struggling with debt. As an alternative to bankruptcy, an IVA involves negotiating a deal to consolidate all debts into a single monthly payment that the debtor can afford.
Negotiations with creditors are carried out under the direction of a licensed insolvency practitioner, and the final deal comes with a number of legal protections. Several of these are to the advantage of the debtor, such as freezing interest and a provision to wipe off all remaining debts once the agreed term for the IVA is over.
Lack of transparency over fees
In line with the legal requirements, Vanguard did indeed have a licensed insolvency practitioner in its employ. But what it was doing was essentially touting to arrange IVAs for people struggling with debt at scale, charging them a fee for doing so, and then outsourcing the actual work to third parties.
What is more, under a fee sharing arrangement, some of these third parties would then make payments to two other companies, MDN Consultancy and KIS Financial Consultancy – which were connected to Vanguard through close personal or family relationships.
According to the case brought by the Insolvency Service, there was no transparency about how customer’s arrangement fees were handled or what the money was used for, which should have been the responsibility of the licensed practitioner. None of the firms involved contested the winding up petition and were therefore liquidated.
This case underlines how important trust is in the debt advisory sector. In most cases, people are seeking help because they are already in considerable financial difficulties. Any fees they pay are a further risk. They deserve and need transparency about what the money is being used for, and guarantees that it is in their best interests.
At JT Maxwell, we passionately believe that debt advisory and relief services provide vital assistance to people in need, and it’s to the detriment of people who are struggling with debt that the actions of an unscrupulous few stain the reputation of the whole industry.
What we would say to anyone seeking help with debts is to do your research before you commit to a service. Read customer reviews and testimonials, and if there are none available, look elsewhere – it’s probably a sign that the service is not up to scratch.
If you’d like to know more, get in touch with us. We’re always happy to provide free, impartial, honest advice to help you make the right decision for you.