The new IVA Protocol 2025 has been published and what a breath of fresh air it is. Congratulations to all involved in its creation.

The new 2025 protocol will run in parallel with the 2021 protocol until 1st July 2025 when it will become the IVA protocol that the whole industry is working to.

The 2025 protocol provides some important changes and also provides some very welcome clarification.

Key changes and clarification are ;

1. Creation of a new ‘Key facts’ document, which must be given to consumers before they agree the IVA proposal.
2. Clearer guidance on when a protocol IVA is not suitable. For example, if the consumer qualifies for a Debt Relief Order, or where total debt is under £7,000.
3. The consumer’s family home will no longer form part of their IVA.

These are big and welcome changes. In addition to the clarification around the treatment of DRO eligible cases and those low value debt cases there is also clear guidance on additional diligence that should be undertaken when proposing  “benefit cases”.

Perhaps the biggest change and one the whole industry will welcome is the clarification on the treatment of equity in the family home. Whilst this is in part a formal recognition of what was already happening in may cases  it is excellent news and will make it far simpler for home owners to enter into an IVA with clarity and certainty that their home is not part of the IVA although it may impact the length of the IVA.

In summary the amount of equity is calculated as being 85% of market value less secured borrowing. Where the amount of equity is less than £10,000 this will be disregarded where it is higher then the IVA will run for 72 months rather than the standard 60 months. Those with high levels of equity may not be suitable for a protocol IVA but may be eligible for a bespoke IVA which takes that equity into account.

There is also an important reference in the Protocol to Creditor behaviour and provides formal confirmation of what we have been telling Creditors since the creditor events which we ran last year and that is;

"The FCA consumer duty should be a benchmark for all creditors in all dealings with a protocol IVA”.

This means that when considering how to vote on a protocol IVA and indeed in respect of any IVA they must consider the consumer outcome. That is why we developed our IVA Integrity score to help creditors both discharge and evidence that consideration.

It is perhaps  time for Creditors to start to consider how they will satisfy the FCA should they ask the question because those Creditor Obligation paragraphs would not have been included in the new protocol without consultation with the FCA. So those questions are going to be asked sooner or later.