In today’s consumer finance landscape, lenders are grappling with increased regulatory demands, the need for fair consumer outcomes, and the pressure to maximise returns on Individual Voluntary Arrangements (IVAs).

While IVAs offer a structured pathway for consumers to manage their debts, they also present lenders with complex challenges. Decisions on IVA proposals need to be both effective and efficient, balancing the interests of creditors and debtors, all while navigating a landscape of evolving compliance standards.

The challenge for consistent decision making in IVAs

For lenders, deciding on IVA proposals is not simply a matter of reviewing a few key points; each proposal may come with varying levels of detail, terms, and financial viability. This inconsistency can lead to delays or, worse, uninformed voting that might compromise the lender’s returns or fail to serve the consumer’s best interest. Lenders must ensure that every proposal is assessed consistently, allowing them to align their decisions with both internal policies and regulatory obligations.

Balancing the pressure for Consumer Duty compliance with returns

The FCA’s Consumer Duty requires creditors to act in the consumer’s best interest, which translates to supporting fair and manageable debt solutions. For lenders, this means going beyond the numbers in an IVA proposal to understand if the terms genuinely support a sustainable repayment for the debtor. However, in doing so, lenders face the challenge of balancing empathy with financial prudence. They need to navigate cases carefully, ensuring that decisions maximise recovery potential while promoting viable outcomes for consumers.

Ensuring voting accuracy and mitigating operational risks

Lenders also face operational hurdles in the voting process. Historically, IVA voting involved substantial manual oversight, with teams needing to sift through lengthy documents to interpret proposal terms and judge alignment with internal mandates. This manual process can introduce errors, especially in high-volume portfolios. Accurate voting is essential; not only does it influence the returns but also contributes to reputational risk if not handled with due care and diligence.

Transparence in outcomes: A key to buiding consumer trust

Transparency is a growing expectation among stakeholders, and creditors are no exception. As consumers become more informed about their financial rights, lenders must be prepared to demonstrate that their IVA decisions are fair and grounded in comprehensive assessments. Transparency benefits both parties; it reassures consumers that the process is unbiased and aligns lenders with regulatory demands, helping to safeguard against potential compliance breaches. Maintaining accurate records of each decision and establishing clear rationales for each outcome are essential steps to fulfil this responsibility.

Data integration challenges in evaluating IVA proposals

Lenders often struggle with fragmented data, making it difficult to review IVA proposals holistically. Without a consolidated data view, lenders face delays in interpreting key financial information, which is critical for an informed decision. Integrating consistent data, whether for understanding debtor circumstances or tracking payments, remains a pressing need. Data management challenges can impede lenders’ ability to make timely, well-rounded assessments, which could affect both returns and regulatory compliance.

Supporting vulnerable customers in a high-stakes context

Another challenge is identifying and supporting vulnerable customers within the IVA process. Vulnerability considerations are now a central element of Consumer Duty, requiring lenders to account for personal circumstances that may affect a debtor’s ability to follow through with an IVA. Failing to address these aspects not only risks poor consumer outcomes but could also lead to regulatory scrutiny. Establishing clear procedures for flagging and appropriately managing vulnerability is crucial, as it aligns with the lender’s duty of care and enhances overall portfolio health.

Towards a sustainable and accountable approach

Achieving a sustainable balance in IVA portfolio management requires lenders to address these challenges holistically. Effective IVA management isn’t only about maximising returns but also ensuring that decisions are fair, transparent, and conducive to genuine consumer recovery. This approach strengthens relationships with consumers and fosters trust, while also supporting regulatory requirements and enhancing portfolio performance.

How Trustfolio supports lenders in overcoming these challenges

Trustfolio’s platform is designed to address the very challenges lenders face in managing IVA portfolios. By digitising the communication process, Trustfolio enables consistent and transparent decision-making,

helping lenders ensure that voting aligns with internal mandates and regulatory requirements. Through integrated data and real-time reporting, lenders gain a clear view of each proposal’s key elements, supporting both accurate and efficient voting.