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Last Updated: Wednesday, 11 April 2007, 11:47 GMT 12:47 UK
Debt firms told to drop adverts
Worried woman
IVA adverts should not be misleading, says the ASA
Three firms that set up individual voluntary arrangements (IVAs) for people in debt have been told to stop making exaggerated claims in adverts.

The Advertising Standards Authority (ASA) has ruled against radio and TV adverts from Accuma, Money Debt and Credit, and W3 Debt Solutions.

In each case the firms claimed that customers could write off up to either 75% or 80% of their debts.

The ASA said in fact very few customers would be able to achieve this.

Because of this the firms were told their adverts were misleading and should not be repeated.

In future, any adverts should refer to a more realistic level of debt-write off which a significant proportion of their customers could expect.

IVAs are a formal deal between a debtor and his or her creditors, overseen by a licensed insolvency specialist. In return for promising to pay off a part of a debt in regular instalments, creditors agree to write-off the rest.

Fees

The complaints about the advertisements were made by a rival IVA provider, Debt Free Direct.

HOW TO GO BUST
Bankruptcy: The traditional way of escaping overwhelming debt. Ends after one year, but you are likely to lose all your assets including your house to pay something to the creditors
IVA: A deal between you and your creditors, overseen by an insolvency practitioner. Less stigma, less chance of losing your home, but involves paying some of your debts in one go or over a number of years

It had complained that the adverts were exaggerated and could not be substantiated.

It also said that the adverts did not make it clear that the insolvent customers might have to pay fees for the IVA which would reduce the amount of debt that would eventually be written-off.

Accuma said it had no plans to repeat its offending advert, while the other two firms whose adverts were scrutinised by the ASA were told not to make the exaggerated claims again.

The ASA's rulings were welcomed by Citizens Advice.

"Citizens Advice has seen cases of people being persuaded to take out IVAs when these are not appropriate, often with disastrous results," said the consumer organisation.

OFT warning

The ASA's ruling is part of an increasing regulatory scrutiny of the IVA industry, which has sprung up in the past few years as the number of people getting deeply in debt has grown.

The firms advertise widely in papers and on day-time TV, offering to arrange IVAs for people who cannot repay all their debts but who wish to avoid a formal bankruptcy that might see them lose their homes

Earlier this year the Office of Fair Trading wrote to 17 IVA firms warning them that they were making misleading claims and threatening to withdraw their licences to operate as credit businesses if they did not rein in their more extravagant claims.

However, accountancy firm PwC has suggested that the number of people entering IVAs has been falling in recent months.


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