Some debt advice firms pick off fees and leave victims even worse off

Fee-hungry debt advisers are today accused of fiddling figures to profit from vulnerable clients. 

The City watchdog warned last week that so-called debt packager firms are cashing in by manipulating customers’ income and spending records to qualify them for repayment plans that pay commission of more than £1,000. 

Money Mail has also seen bank statements that seem to have been doctored to hide a gambling addict’s betting, so he would qualify for such a scheme. 

Stung: Mick and Stephanie Gales were cold-called by a firm claiming to have the answer


Mick and Stephanie Gales were desperate for help with their £9,000 debt when they were cold-called by a firm claiming to have the answer. 

And Mick, 34, says debt advisers convinced him an IVA (Individual Voluntary Arrangement) was the only way out. Yet now he realises he and his wife, 35, might well have qualified for debt relief orders at just £90 each. 

Mick says he has learning difficulties including ADHD, and struggled to understand the paperwork involved. But he is clear that at no stage did anyone putting him forward for an IVA ask about his health. 

The engineer’s troubles began in 2010 when a delay to benefits payments left him low on cash. A doorstep lender convinced him to borrow £300, which grew to £1,500 and snowballed out of control. 

Mick, from Luton, says: ‘We were a young couple and we let debt run away with us. We didn’t know what to do.’ 

He says a debt-help firm, which has now folded, rang him out of the blue and convinced him to sign up to an IVA with Hanover Insolvency in 2018. Mick says: ‘We were desperate to get out of debt and that call seemed to be the solution. I was taken for a mug.’ He says he was pressured into an IVA and told exactly what to say to Hanover to ensure that he qualified. It is understood that the debt adviser received £850 for referring Mick to Hanover Insolvency. 

Mick says: ‘They were saying it was the only way. They gave me no other choices. They have done this for one thing only, and that’s to make money out of us. It has caused depression and anxiety.’

So far, more than £3,000 of the family’s repayments is understood to have gone to Hanover, leaving little more than £30 to each of the couple’s ten creditors. 

Mick now feels he should never have been approved for an IVA. He says the figures used by Hanover did not give an accurate picture of the family’s assets and income. 

Insolvency expert Roger Wallis, who is fighting to release Mick from the IVA, says: ‘If it was a simple debt relief order, they would be out of it by now.’ 

Yet Hanover says Mick was not e­ligible for a DRO, and that the couple had both accepted the value of their cars and income and expenditure detailed on the IVA proposal. Hanover stopped working with the firm before it went bust. 

Experts have warned that debtors are being ‘factory farmed’ to rake in fees on an industrial scale. 

Struggling families say they have been left worse off after being pushed into unsuitable and unaffordable debt solutions, when they might have been able to wipe it all for just £90. 

Our findings come as experts warn that more households are at risk of debt as we emerge from the virus crisis. 

Watchdog the Financial Conduct Authority (FCA) last week announced a new crackdown on debt advice firms. 

The move comes after experts estimated earlier this year that an extra 1.5million people will need help with money owed in the coming 12 months. 

And Britons have started to spend again after being locked down. In May, they borrowed more than they paid off for the first time since August 2020. 

The FCA’s concerns centre on individual voluntary arrangements (IVAs) — deals struck by insolvency practitioners between a debtor and creditors which mean the debt will be cleared after a set period if monthly repayments are met. Protected Trust Deeds (PTD) are a similar solution used in Scotland. 

The regulator fears debtors are being persuaded by debt packager firms to take up IVA repayment plans that are not in their best interest but pay the adviser a fat commission.

Debt-packager firms are regulated by the FCA and supply candidates, financial documents and details to insolvency practitioners to set up the IVA. Insolvency practitioners also pocket a share of the repayments and can get as much as £5,000 per deal. 

But if the person in debt cannot keep up their payments and the agreement is broken, then they are back to square one, having wasted money on fees and with long-term damage to their credit score.


Roger Wallis, who has worked in the insolvency business for more than 30 years, says he has helped more than 100 people escape from unsuitable IVAs. 

He believes 80 per cent of IVAs have been mis-sold and says the market is exploiting vulnerable people, who should be offered better solutions such as a debt relief order (DRO), which costs just £90 and can only be arranged by a specialist debt adviser. 

A DRO will wipe most of your debt after a year if you stick to strict restrictions. To be eligible, you must owe less than £30,000, have less than £75 to spend each month, and have assets worth less than £2,000. 

Mr Wallis claims that big insolvency firms would simply not exist if IVAs were only handed out appropriately. He says: ‘(Those in­ debt) are dealt with by kids in a call centre. As long as people are paying, they are not bothered. They are making millions every week. 

‘There are practitioners out there trying to do a good job but also a lot who are raking it in.’ 

He adds: ‘I really wish the Government and the FCA would put in a regulation stipulating that debt advice has to be best for the client, not the firm. It would change the industry immediately.’


Insolvency practitioner Paul Mallatratt, who has been in the business for 24 years, says: ‘A consequence of the booming IVA market has been the emergence of high-volume ‘IVA factories’. 

He says much of the business handled by such factories comes ‘packaged’ from debt-help firms that use slick TV and radio adverts. But he says it is an insolvency firm’s duty to check that the consumer is right for an IVA. 

He says: ‘I’ve been aware of cases where vital information such as mental health issues, a history of gambling or missing partner’s information has been apparently ‘overlooked’ which would have meant an IVA was not right for that individual.’ 

Large firms handling tens of thousands of IVAs include Creditfix and Hanover Insolvency, which has about 35,000 IVAs on its books. Insolvency practitioners at both firms have been repeatedly sanctioned by the industry regulator but continue to hand out IVAs.


The FCA said it has found evidence of debt-packager firms manipulating their clients’ income and expenditure to meet the criteria for an IVA or PTD. 

The regulator said some firms were using ‘persuasive’ language to promote the products without fully explaining the risks. It also said firms had failed to take sufficient account of customer circumstances and vulnerabilities, including mental health issues and economic abuse. 

Sheldon Mills, executive director of consumers and competition at the FCA, says: ‘The practices we’ve seen in this sector fall far short of the standards we expect. We will not allow firms to profit from debt advice that puts their customers at risk of harm.’ 

One man, who was £22,000 in debt, told Money Mail he suspects his bank statements were altered to hide his gambling addiction. The man, who did not want to be named, sent bank statements to a debt-help firm, which applied for an IVA with Creditfix on his behalf. But one original statement he sent to the FCA-regulated firm, which Money Mail has chosen not to name, differed from the one Creditfix says it received. 

The statement, from June 2019, showed the man spent £2,235 on gambling that month alone. Yet Creditfix said it had no evidence of this before it agreed to set up the IVA. 


An Individual Voluntary Arrangement (IVA) is a deal that enables someone to make monthly repayments in order to clear all, or part of, their debt over an agreed period. 

The legally binding deal is struck between the debtor and creditors by an insolvency practitioner. To qualify, you must owe at least £6,000 and be able to afford repayments of at least £90 a month. 

IVAs, introduced in 1986, have now become the most popular debt solution. 

A debt relief order (DRO), on the other hand, can clear most debts after just a year and requires no repayments. 

They are a simplified, quicker and cheaper alternative to bankruptcy as an insolvency measure. 

DROs are available for just £90 to those with debt of up to £30,000 who are left with less than £75 to spend every month and do not own a home. 

Debt advisers can earn more than £1,000 in commission for referring someone in debt for an IVA — but nothing if they clear their debts with a DRO.

The original statement shows his wages coming in on pay day, and two days later £50 spent at casino gambling firm WHG London. But the statement sent to Creditfix shows he instead spent £50 at ‘’ on that date. There was also no sign of him spending £450 in one day at a bookmakers. £5 deposits to online gambling sites have also disappeared; instead the statement shows he spent exactly £5 at ‘Asda Stores’ and twice at ‘Khan’s Corner Shop’. 

After Mr Wallis helped the man complain to Creditfix, it agreed to release him from the IVA. Creditfix no longer accepts referrals from the firm in question. 

One reviewer on Trustpilot has claimed the same debt-packaging company altered her outgoings when applying for an IVA, cutting the cost of her car insurance and even claiming she had a pet. They wrote: ‘(The adviser) tells you to do whatever it takes to be accepted for the IVA, just so she can get her commission of £1,900.’


Debt-advice firms are regulated by the FCA but insolvency practitioners are regulated by industry watchdog the Insolvency Practitioners Association (IPA). 

Following its review, the FCA wrote to five debt-packager firms, citing concerns over their practices. These companies have all now agreed to stop advising those in debt until the FCA is happy. 

The watchdog also removed debt-packaging firm Action On CIO’s permission to provide debt advice, after it was found to be using a script with customers that appeared to be weighted towards recommending a debt solution that generated a referral fee. 

The regulator is considering whether changes need to be made to the market and will consult on any proposals later this year. 

The Advertising Standards Agency (ASA) has banned promotions by six debt firms this year. Last month it ruled against ads on Instagram posted by reality TV stars with millions of followers. 

The watchdog said the Instagram posts promoting debt-advice firm Debt Slayers had made misleading claims about the ease with which debt can be cleared, and failed to make it clear they were adverts. One offending ad read: ‘One of my friends just got 81 per cent of his debt wiped off.’


IN February, Money Mail reported how some debt-help firms were posing as charities online and claiming to offer government-backed schemes, to divert those struggling with debt away from the free help on offer from bodies such as Citizens Advice and the bona fide charity StepChange. 

Money Mail again googled ‘help with debt’ this week — and the top five search results were misleading adverts promising ‘government-approved’ solutions that could clear ‘up to 90 per cent of debt’. 

Sue Anderson, of the debt-help charity StepChange, says IVAs are still failing too often, adding: ‘It’s hard to avoid the conclusion that mis-selling is happening. ‘People are still being hoodwinked into taking out IVAs when proper advice could potentially identify a better solution for them. 

‘Until the regulatory system finally catches up and puts the IVA market right, we urge anyone looking for debt help to use a reputable debt-advice organisation.’ 

A Creditfix spokesman says: ‘As well as being authorised and regulated by the FCA, all introducers must sign our introducer agreement and are subjected to regular audits to ensure adherence. 

‘We have a robust complaints process, should any customer feel they have not received the highest-quality service. We are investigating the issues raised and will take action as required. We take all sanctions raised against insolvency practitioners very seriously.’ 

Hanover Insolvency says it only accepts cases from FCA-authorised and regulated debt advisers. The firm’s Dylan Quail, an insolvency practitioner, says: ‘There are numerous legitimate reasons for such discrepancies. However, we do also come across cases where they cannot be explained. 

‘If Hanover are not satisfied with the work of the debt adviser, the business relationship is terminated immediately and, in appropriate cases, the matter will be brought to the attention of the debt adviser’s regulator.’ 

Mr Quail admitted he had been sanctioned by the Insolvency Practitioners Association (IPA), but said it was ‘impossible to eliminate human error’, adding that the percentage of client complaints which lead to disciplinary action was likely to be ‘absolutely tiny’. 

An IPA spokesman says it welcomes the FCA’s action. He says: ‘We have rigorous monitoring procedures that involve sanctions on individual insolvency practitioners, but current legislation does not allow for sanctions on firms. This is an area where the IPA has been lobbying for change.’