Debtmatters has announced that it has quit the controversial Individual Voluntary Arrangements (IVA) sector because of the the fallout with the lenders regarding falling fees and would concentrate on providing secured personal loans instead.

Debtmatters sold its portfolio of IVAs for £6.4 million pounds to a consortium of Grant Thornton and Totemic Ltd.  This was £2.5 million pounds lower than the price the broker Numis had expected the 50 cases a month portfolio to fetch.

Debtmatters also sold other arms of the debt management business for an extra £800,000 pounds.  The company also announced it will now change its name to Loanmakers.

New banking facilities to the value of £3.5 million are in place to help the newly developed company to succeed during the turbulent credit crunch. 

In a statement the Chief Executive of Debtmatters Ges Ratcliffe stated:

“It was becoming increasingly difficult to operate a successful direct marketing IVA business with acceptable profit margins in the face of increasing costs of case acquisition and reduced fee levels in tandem with ongoing sector uncertainty.”

IVAs is a light form of bankruptcy allowing indebted consumers to pay back their debts over a longer time period (typically five years) allowing debtors to avoid the full stigma of bankruptcy.

Over the last 12 months IVA companies have been under fire from high street banks for charging the lenders a high set up fee for the IVAs and not returning enough of the money to the lender.

The IVA fees fell last year when the IVA providers and the lenders first clashed over the IVA set up fees.  Anaylsts have also told Reuters the IVA fees could end up falling by as much as two-thirds.

A new set of standards to help people resolve their debt difficulties through Individual Voluntary Arrangements (IVAs) have now come into play.  This comes after over one year of disputes between the IVA providers and the credit industry.

Debtors looking to enter into an IVA now have the surety that there is an agreed standard for providers to adhere to for advertising, advice, information and documentation, as well as higher levels of transparency.  This will ensure a higher level of protection in line with the FSA’s philosophy of treating customers fairly as IVA providers adhering to the standards will operate openly and fairly to help people take the right path back into solvency.

The set of protocols were agreed at a meeting between the credit industry, which was led by the British Bankers Association and IVA providers.  The meeting was also chaired by the Insolvency Service to ensure a streamlined process was established for consumers looking for help with their debts via an IVA.

BBA Chief Executive Angela Knight said: “People in debt and their creditors need to know that when an IVA is proposed it is the most appropriate solution. The BBA, the Insolvency Service and the participating IVA providers are united in support for this agreement, which should provide customers with the reassurances they need in order to make the right choice for their financial futures.”

The agreement sets out the standards that will apply to creditors and IVA providers in most IVA cases. It was agreed by representatives from the creditor, insolvency, advice and consumer sectors, under the chairmanship of the Insolvency Service.  Further work is underway to provide accessibility to better market information on IVAs through the worldwide web.