Record insolvencies boost UK debt firm's profits

Debt advice firm Debt Free Direct forecast bumper profits today as record numbers of people became insolvent.

The company said it expected to bank pre-tax profits “at least 10% ahead” of the £9.8m (€7.6m) forecast by City analysts this year.

It pointed to a massive increase in the number of people entering individual voluntary arrangements (IVAs), which allow people to repay a set amount of cash each month in exchange for creditors freezing interest payments on the debt.

Debt Free Direct issued an average of 551 IVAs each month between May and July - up 196% on the same period last year – and a record 607 IVAs in August.

The numbers have soared as more and more people struggle to pay off loans and credit card bills at a time of soaring household energy bills, rising inflation and higher interest rates.

Last month the government said a record 26,021 people in England and Wales became insolvent during the spring and financial services group KPMG predicted the total number of insolvencies this year would top 100,000 – the equivalent of one every minute of the working day.

It has provided a boost for Debt Free Direct, whose shares lifted more than 4% today. Shares in the company have soared by as much as 189% this year.

Altium Securities analyst Martin Cross said it was “another very positive trading update” from the firm.

Mr Cross also forecast the number of monthly IVAs issued by the firm to rise to 900 next year and 1,100 the following year.

Chief executive Andrew Redmond said recent research by PricewaterhouseCoopers showed that lenders got on average 29% more money back through IVAs issued by Debt Free Direct than the rest of the industry.

“This can only contribute positively to our market-leading position,” he said.

The firm added that its recently opened operations in Northern Ireland and Australia were going well.