Frankly I’m getting a bit sick of people blaming misselling of IVAs as a problem of "greedy and evil AIM floated commercial IVA providers".

You see while people keep using this phrase, what does it really mean and how can we regulate against IVA mis-selling?

There seems about as many ways of spelling misselling as their is of problems occurring in the IVA process.

The IVA Sales Process

Every product and service in the world has a sale process. Everything from buying bread at the market to deciding which car wash to take your car for cleaning. Debt solutions are no different, nor are the government commercials for cutting out salt, avoiding letting your car tax lapse or not committing benefit fraud.

Anytime there is a presentation of benefits to fit a need or desire or to spread a message, you actually have a sales process in motion. A good sales transaction of any widget will involve meeting the customers expectations, delivering the right product or solution to meet their needs and then providing exceptional customer service after the sale.

So what is IVA misselling. I’m still a bit stuck on it and unfortunately I think the best I can do is say that I recognize it when I see it, but how do you define it?

The free advice sector claims too many IVAs are sold to people but then again the free advice sector seems to have a real problem with people paying for anything. The outsiders in the debt management world think to many IVAs are promoted as a solution and many inside the industry think to few IVAs occur and consumers have restricted access to a good solution.

I think that mis-selling or suggesting the wrong solution is prevalent when the adviser imparts their own prejudice into the advice they give . For example, a free advice volunteer that tells someone to go onto a token payment debt management plan because IVA providers charge fees, that would be misselling.

Or take an IVA provider that put someone into an IVA if they knew for an absolute fact that the consumer only had 12 more months on a job and then would be out of income and work. Marginal example, not sure we would know that the person would not be employed again. Anyway, you get the point.

Let’s take a consumer that is put into a debt management plan (DMP) instead of an IVA, while promoted as “FREE” to the consumer because the DMP company is really making a nice chunk of change out of collecting the monthly payments.

How about the debt adviser that suggests a DMP rather than an IVA because the creditors they work with have made it clear to keep debtors out of an IVA so those accounts don’t look bad on the bank books?

Misselling also happens when an adviser looks at a case and suggests bankruptcy since it would be the right mathematical approach to take to eliminate debt as soon as possible but that approach does not take into account the emotional temperature of the debtor.

Should we force people into bankruptcy even if mathematically better if they want to make every attempt to repay their debt for moral or religious reasons?

The consumer may perceive they have been missold an IVA months latter when they read some IVA forum or read some article in the paper and then think they were a victim. In fact, what has happened in many cases is that the IVA resolved the immediate pressure the debtor was feeling and once that pressure has been lifted a look back always seems less stressful than it actually was.

“I could have handled it myself”, some might feel but if you could rewind the tape of their life you’d be able to show them how they couldn’t sleep, the stress at the time was impacting their life, they were losing weight, fighting with their partner, etc. That part seems to get forgotten the further we move from the event. It’s just basic hyperbolic emotional discounting that occurs in all parts of our lives.

Best IVA Sales Process

The best debt solution sales process happens when the adviser matches the right solution to the debtor and that solution incorporates two features. First, we need to make sure the solution is technically appropriate. Second we need to make certain the solution is emotionally appropriate.

A good technical solution that disregards the life desires or emotional goals of the consumer misses the target as well.

Government Regulation to Prevent IVA Mis-Selling

Why? Why in the world do we need more regulation. If a consumer has been lied to or advertising is misleading, there are already avenues for taking those complaints forward.

But trying to draft rules and regulations to cover a situation where solutions have a technical and emotional component is like trying to regulate what dresses a woman should only be able to buy, or suits for men. And how do you think that would work. “I’m sorry but according to this government regulation that dress makes you look fat.” I'll let you tell her.

If we try to do that it will be a mess, more government resources will need to be spent to enforce an ineffective solution and the only possible outcome is that more consumers will be missold by being forced into a solution that is not right for them because some bureaucrat said so.