ASA Adjudication on Debt Free Direct Group Plc

Ad

A TV ad, for Individual Voluntary Arrangements (IVAs), claimed "There is a little known piece of government legislation that could write off what you can’t afford to repay, stop creditor hassle, cut your monthly repayments by hundreds of pounds and set you debt-free in just 60 months. And it won’t cost you a penny".

Issue

The complainant, who believed that fees were payable as part of the monthly repayment on an IVA, challenged whether the claim "it wont cost you a penny" was misleading and could be substantiated.

BCAP TV Code

Response

Debt Free Direct said they provided free, impartial advice to everyone who contacted them and they did not charge clients for IVAs even if creditors rejected the IVA proposal. They explained that, when preparing a proposal for an IVA to creditors, an Insolvency Practitioner assessed what the debtor could reasonably afford to pay in monthly contributions and negotiated fees for the preparation and supervision of the IVA with the creditors. They said that, in cases where the IVA was approved, the debtor's monthly contributions were paid into a fund administered by the Insolvency Practitioner for the benefit of the creditors. They said fees were paid out of the arrangement funds and argued that, because the creditors were the beneficiaries of the fund, they bore the cost of the fees and not the debtor.

The Broadcast Advertising Clearance Centre (BACC) said they did not consider the claim misleading because creditors bore the cost of an IVA.

Assessment

Upheld

The ASA noted that, in an IVA, debtors did not pay fees separately but that, typically, fees of around £8,000-£9,000, including VAT, would be taken from the fund into which they paid during the term of an IVA, which was usually 60 months. We noted that the fund was held in trust for the benefit of the creditors but that all the money in the fund issued from the monthly repayments made by debtors. We noted that debtors paid a larger amount than the dividend payable to creditors and that, if the IVA failed, debtors would be responsible for the balance of the debt. We noted that, in those circumstances, the sum of their repayments under the terms of the IVA would be greater than the amount of debt they had paid off. We considered that the claim "it won't cost you a penny" implied there were no costs associated with an IVA. Because we understood that was not the case, we concluded the claim was misleading.

The ad breached CAP (Broadcast) TV Advertising Standards Code rules 5.1 (Misleading advertising), 5.2.1 (Evidence) and 5.2.3 (Qualifications).

Action

The ad must not be broadcast again in its current form.

Adjudication of the ASA Council (Broadcast)