Calls for companies who market IVAs to be slapped with stricter regulations have been rejected by the government.
Banks had petitioned for stricter rules to be applied, claiming there own losses from bad debts were directly related to the increased marketing of Individual Voluntary Arrangements, or IVAs.
IVAs are considered the alternative to bankruptcy and let people settle their debts by wiping off up to 75% of the amount they owe and paying the remaining balance off in instalments.
Jim Fitzpatrick minister for the department of Trade and Industry said that the banks themselves had to stomach some of the blame. “Maybe the banks are lending too much money or maybe they're not being as careful as they used to be in scrutinising the applications."
Banks in the UK wrote off £3.3 billion in bad debts in the first half of this year alone. They believe people are using IVAs as an easy way out of paying their debts.