People who are struggling to manage their finances are set to be offered greater protection after an agreement was reached over the way individual voluntary arrangements (IVAs) can be advertised and run.

A set of standards has been drawn up by IVA providers and the credit industry which will govern how IVAs are promoted, as well as the advice, information and documentation given to people who take out one of the plans.

The new scheme, which comes into force on Friday, also aims to make IVAs more transparent and reassure consumers that IVA providers who follow the standards operate in their best interests.

However, the new set of standards does not cover what firms can charge to set up one of the agreements, and fees will still be decided on a commercial basis.

The new system was agreed at a meeting between IVA providers and the credit industry, which was led by the British Bankers' Association and the Insolvency Service.

Under the terms of an IVA lenders agree to suspend interest on debts on the understanding that the consumer will repay a set amount each month, usually over a five-year term.

But creditors have raised concerns over the way IVA fees are structured, with most companies receiving fees up front, meaning they have little incentive to make sure consumers fulfil their obligations.

There has also been concern among lenders that members of the public are being forced to take out IVAs when they are not the most appropriate solution to their problems.

BBA chief executive Angela Knight said: "People in debt and their creditors need to know that when an IVA is proposed it is the most appropriate solution.

"The BBA, the Insolvency Service and the participating IVA providers are united in support for this agreement, which should provide customers with the reassurances they need in order to make the right choice for their financial futures."

The move was also welcomed by Stephen Sklaroff, director general of the Finance And Leasing Association.

He said: "FLA has long campaigned for greater transparency in the IVA sector. This code will provide greater certainty to both debtors and lenders, and shows the power and relevance of self-regulation in the financial sector."

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