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Don’t fall for false advertising regarding IVAs

Over the last couple of years the UK has seen a dramatic increase in the number of financial companies that are offering services to try and help them to get out of debt fast.

With consumer debt in the UK heading for the one and a half trillion pound mark, many households and individuals have found themselves unable to keep up with repayments on unsecured credit such as personal loans and credit cards, and for these people the glossy advertisements offering a way out of the debt mountain has sounded like the ideal solution.

However, according to the Office of Fair Trading some of the companies that are offering debt solutions are actually taking part in false advertising, and have been accused of making false claims as well as being accused of failing to warn consumers of the disadvantages of opting for debt solutions such as IVAs.

An IVA is an Individual Voluntary Agreement, which is designed to reduce the amount that the consumer repays each month to each creditor and aims to have any unpaid debt written off after five years.

According to some of the companies advertising IVA services the consumer could see his or her debt reduced by up to ninety percent, which according to the Office of Fair Trading is far higher than the actual reduction that they can expect to see. Many consumers are also not being told about the pitfalls of such action.

One OFT spokesperson stated: "A lot of these adverts and promotions push the potential benefits of these arrangements without mentioning some of the potential pitfalls. There were also some misleading statements. Some were claiming that up to 90% of the debt might be written off when the maximum is likely to be in the region of 60-70 per cent. There was also a failure to display warnings about the possibility of bankruptcy if an IVA fails, and that an individual's credit rating can be affected for up to six years."

Tom Smith
16th March 2007


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