Recent developments in the debt solutions sector means that borrowers in trouble are finding it harder to escape their debt burden. Over the past few months, as the credit squeeze bites even further, banks have allegedly hardened their approach to agreeing to Individual Voluntary Agreements (IVAs).

Although one of the most used ways of discharging debt, the amount of IVAs agreed has been reducing steadily even though the figures show that more people are getting into financial difficulties, and that looks set to rise as even more borrowers get over-extended. The IVA is the last resort before going bankrupt but the Debt Resolution Forum (DRF) claims that banks and credit card companies are setting out to do as much as possible to block IVAs, unless they get a combination of higher payments from their borrowers and lower fees charged by debt solutions companies and IVA providers.

An IVA cannot be granted unless 75% of the creditors agree to it, but because banks have been recovering as little as 10% of their debt through IVAs, many have simply been refusing to sanction the agreements. But, the banks are quick to point out that they are not deliberately frustrating the IVA process. Mark Hover, head of The Insolvency Exchange (TIX), a group that represents HBOS, HSBC, RBS, Direct Line and Marks and Spencer, said: ?We want more acceptable returns to creditors. Plus, IVA providers are still charging a ?specialist? fee for what is now a ?commoditised? product. As the average IVA fee is around ?7,500 we think that should fall to nearer ?5,000 reflecting the lower administration charges actually incurred on most agreed IVAs.?

Hover counters the DRF claim that banks have been rejecting more IVAs stating that acceptance rates are staying steady at around 80%. But, in direct contrast to the view put forward by the DRF, TIX believes that more over-stretched borrowers would take out IVAs if the fees were lower. However, it's the pressure to reduce fees that is forcing companies to reduce their advertising, and they in turn are finding that their conversion rates are falling.

As a consequence, as well as watching their own incomes dwindle, many insolvency practitioners are concerned that effective debt management advice is becoming harder to get for over-stretched borrowers, and are urging the banks to reconsider their hard-line approach to accepting IVAs.

With over 250,000 people contacting debt charity Consumer Credit Counselling Services (CCCS) since the start of the year, up almost 25% on the same period last year, it is becoming increasingly clear that many people are struggling under the burden of unmanageable debt. The banks and the insolvency industry need to settle their differences in order to help those who need it most.