I was a desperate single mum trying to clear £7,000 debt – how to avoid my easy mistake

SINGLE mum Marie Roberts desperately searched for help to pay off her £7,000 debt – but an easy meant it cost her hundreds of pounds extra and took over half a decade to pay off.

In 2019, the now 40-year-old, who lives in Newport, South Wales, was struggling with money, working as a part-time cleaner.

“I would stay awake most of the night going over in my head how I was going to get through the next week, let alone the next month”.

“I would wish for payday then when it came it was all gone within one day paying debt,” she says.

At her lowest point Marie, who has two children, now aged 12 and 15, Kai and Liam, had three maxed out credit cards and three high interest payday loans and owed £7,000.

She had store cards for Argos and Currys she used to buy Christmas presents for her two young sons and payment plans with sites like Studio and Very.

“I was getting pre-approval letters in the post all the time from credit card companies so when money got tight I took one out. Then another, then another, only ever paying off the minimum,” she says.

Determined to turn her finances around, and about to start a college course to train as an NHS dietician, Marie searched online for free debt help. 

“I entered my details into a couple of websites and someone from one contacted me straight away,” she says. They asked for a list of all her debt and creditors, then recommended an Individual Voluntary Arrangement or IVA. 

This is a controversial form of insolvency that allows struggling people to pay off debts over five years. 

It can be useful for people – but many experts fear the product was mis-sold to people because debt advisory firms were allowed to earn fees for referring customers, unlike other forms of debt.

To crackdown on rogue debt advisers the FCA banned certain providers of debt advice from receiving referral fees from debt solution companies last June, though other ‘admin’ fees can still apply, particularly with IVAs.

The Sun first reported in 2018 that thousands of people may have been mis-sold expensive debt repayment plans.

Instead of using a registered free debt advice service like National Debtline or Stepchange, Marie had stumbled across a debt advisory firm.

Marie says she “massively regrets” taking out an IVA and this was a mistake as she is tied into extra years of debt and unnecessary fees, while being locked out of everyday financial contracts.

She believes she was given bad advice and it wasn’t made clear that the £1,500 admin fee would be added to her repayments by the debt agency and she wasn’t made aware of cheaper options like a debt-relief order (DRO) that could’ve helped clear the money in a year, at no extra cost. 

Instead the half a decade-long IVA means she is still having to repay £77 a month, leaving her finances tight.

She is also heavily restricted in taking out any sort of contract.

“Years on, it’s not just I couldn’t get a joint mortgage with my now husband because of the IVA, all the bills have to be in his name. I can’t set up anything. I feel like a lodger in my own home paying him rent each month. It’s very disempowering,” says Marie.

“It’s affected my ability to take out contracts for a mobile phone and broadband, everyday stuff.”

An IVA is one of the UK’s most common debt solutions. In the first three months of 2024 alone 5,399 IVAs were agreed, adding to 64,000 in 2023.

IVAs, bankruptcy and DROs stay on your credit file for six years from the date you agree to them. But with bankruptcy and DROs your debts are wiped out after 12 months. You can then start rebuilding your credit rating debt-free, although not always easily.

With an IVA you have to pay as much as you can off what you owe, plus often sky high fees. Getting any financial contract until you have completed the full repayment term, typically five years, can be a struggle.

IVAs can cost consumers £3,650 or more in fees. Debt relief orders, considered better than bankruptcy for people with few assets, cost nothing in England and Wales and £90 in Northern Ireland. A similar minimal asset process (MAP) in Scotland costs £50. 

The FCA has seen evidence of debt companies appearing to manipulate customers’ details so they meet the criteria for IVAs and using persuasive language to promote products without explaining the risks.

One consumer, who was homeless, was recommended an IVA costing them £6,000 when they could have been debt-free in one year via a DRO for £90.

Marie, who had to pause repayments during Covid, still has 18 months to pay on her IVA. She says she feels cheated.

“The debt company did the IVA for their own gains. Given the choice again I wouldn’t opt for an IVA,” she says. “I could be debt-free and building my credit score back up, whereas the light at the end of the tunnel is still so far away.”

To crackdown on rogue debt advisers the FCA banned certain providers of debt advice from receiving referral fees from debt solution companies last June, though other ‘admin’ fees can still apply, particularly with IVAs.

Steve Vaid, chief executive of the Money Advice Trust, the charity that runs the free, impartial National Debtline, says with millions struggling there is a “crucial” role for legitimate debt advice.

“No one has to struggle alone, and I would urge anyone who has fallen behind with their bills to seek free advice from National Debtline as soon as possible.”

Sheldon Mills, from the FCA, says anyone worried should “reach out to your lender straight away”. He also recommends going to the government-backed MoneyHelper website for free debt advice.