A number of companies have been targeting those people with an Individual Voluntary Arrangement (IVA) for their debts on loans and credit cards, with unsolicited mail shots advising them to take an alternative route to their debt management and cancel their existing IVA.

The Office of Fair Trading (OFT) has issued a warning to anyone who may have received such mailing, stating that the information contained within it may be misleading. The mail shots suggest to those with an IVA that they may have been mis-sold the product and that an alternative solution to their problem, such as bankruptcy, may be a more suitable option.

The Insolvency service is required by law to maintain a register of those people who currently hold an IVA, which is available to the general public and it is from this list that the companies in question are obtaining the names and addresses of some of the most vulnerable customers for use as their target market.

The main concern which has been raised by the OFT on this issue, is that the mail shots do not make clear the full consequences of an individual cancelling an IVA in favour of declaring themselves bankrupt. One major concern is that if the IVA has been set up fairly recently, then the money which has been paid to the debt management company will have gone towards paying the fees of the insolvency practitioner, rather than paying off the debt itself. This means that in the early stages of an IVA, the creditors will not have received any money from the individual, whose financial situation will probably be even worse than it was previously, should they cancel the arrangement.

The OFT has issued warnings to the companies concerned, stating that they must alter the wording in their communications so that they are not misleading and make clear the implications of cancelling any existing arrangements. In the mean time, people who currently hold an IVA should be very wary of any such communication about their debts.