Misleading Debt Collection Tactics in New Zealand

Friday, December 28, 2018 - Posted by Michael McCulloch

stuff.co.nz is reporting that the New Zealand Commerce Commission has warned a debt collection agency for possibly breaching the Fair Trading Act.

The warning comes following a complaint by a consumer that if she wanted to dispute a debt that she should raise the dispute with them but pay the debt to them in the meantime.

A spokeperson for the Commerce Commission said in a statement that the debt collection agency was incorrect in this advice as the debt collection agency had in fact purchased the debt and that the dispute should be handled by them. The Commission went on to say that it has also warned the debt collection agency to take care in the future to avoid making statements to debtors which may give the impression that Court action was inevitable if the debtor did not make immediate payment.

Commissioner, Anna Rawlings, said, "While debt collectors often need to discuss the nature of a debt and the consequences of non-payment with a debtor, they must not use misleading techniques to pressure debtors into paying or to deter them from pursuing genuine disputes. This includes saying that a debtor cannot dispute a debt, telling them that court action will commence within a certain timeframe when it may not or giving the impression that certain outcomes are inevitable if they are not."

While there may be differences in the legislation surrounding debt collection practices in New Zealand and Australia this article should serve as a timely reminder of your obligations under the Debt Collection Guidelines: for Collectors and Creditors with a specific focus on s13 of the Guidelines regarding disputed liability and s19 of the Guidelines regarding Representations about the consequences of non-payment.

Christmas & New Year Closure 2018

Thursday, November 29, 2018 - Posted by Michael McCulloch

The offices of LCollect and Collection Law Partners will close at midday on Friday, 21 December 2018 and return for business on Wednesday, 2 January 2019.

If you have instructions to postpone or cease collection activity during this period we recommend that you contact us as soon as possible so your request can be accommodated. If you require urgent assistance during the holiday period please contact Philip Harvey.

On behalf of all of us at LCollect and Collection Law Partners we thank you for your continued support in 2018 and look forward to working with you again in 2019 and beyond.

Australian Government To Crack Down On Late Paying Large Corporations & Government Departments {Update}

Thursday, November 29, 2018 - Posted by Michael McCulloch

You may recall in our November 2016 edition of Debt Collection news that there were moves within the Government to crack down on late paying large corporations and Government departments. 

It appears that this issue has been raised again with the Small Business Ombudsman, Kate Carnell, telling Fairfax Media that she was again conducting a review of payment times and the impact that this has on cash-flow on small businesses in Australia.

This again follows the Ombudsmans review into payment times last year, which we covered in Australian SMEs Owed More Than $10,000, which identified Australian payment times as the worst in the world with invoices paid, on average, 26.4 days past due. In a statement to the media Ms Carnell said, "It is big businesses using small business as a cheap bank," Ms Carnell said. "It really does slow down the economy. Poor cash flow is the primary reason for insolvency in Australia.”

The recent move by the Ombudsman appears to have been prompted by Small Business Minister, Michaelia Cash, who requested in writing advice from the Ombudsman for advice as to the impact payment practices have on small business. Ms Cash said, "I am still getting reports of payment terms of 60, 90 or 120 days or alternatively loans for extended payment terms. I find that very troubling particularly when cash flow is king for small businesses. It continues to be an issue and we will tackle it."

Following last years inquiry the Business Council of Australia launched a voluntary code to ensure that small businesses were paid within 30 days of an invoice being issued. With, however only 47 of 139 members, subscribing to the Code there is now some consideration being given to passing legislation in which to compel payment to ensure small businesses continue to survive.

A short survey is available online for small businesses to complete about the payment times they encounter. 

AFCA Announces New Small Business Lead Ombudsman

Thursday, November 29, 2018 - Posted by Michael McCulloch

The Australian Financial Complaints Authority (AFCA) has announced on their website that a new small business Lead Ombudsman will be appointed to resolve financial disputes that small businesses have with their financial service providers (FSPs).

Under AFCA the small business is now defined as an organisation with less than 100 employees and can consider complaints from small businesses with their FSP up to the value of $5 million. AFCA also announced an increase in the available compensation to small businesses from $323,500 to $1 million.

In a statement to the media AFCA Chief Ombudsman and CEO David Locke, said, "With the arrival of AFCA, and the increase in monetary limits, many small business complaints will now be covered by an external dispute resolution scheme for the very first time. This will be a big help and provides small businesses with a fair, free and independent way of resolving their disputes."

The Australian Small Business and Family Enterprises Ombudsman (ASBFEO) has applauded the decision with Kate Carnell saying, "We welcome the announcement of a dedicated small business lead ombudsman,” Ms Carnell said. “We envisage a small business expert will be appointed, which will significantly improve small businesses’ access to justice and save them time and money."

The announcement comes on top of AFCA releasing information that in their 1st week of operation that they received 2,500 calls with a subsequent 1,500 complaints being made.

Instructing on Archived Debts

Thursday, November 29, 2018 - Posted by Michael McCulloch

Did you know that you can instruct us via our online portal for new, current but also archived debts?

We sometimes see new debts opened online where an existing account already exists. This leads to duplicate files being opened and while this does not cause us any problems we find that by maintaining only 1 file for each account type, whether this be a personal loan, overdraft, overdrawn savings account, that it allows you to find the updated information you need for reporting quickly and easily and provides a full debt history.

This month we've created an instructional video, which you can download, which shows how you can quickly and easily locate your previously closed accounts and instruct us to re-open them. Alternatively if you need any additional assistance please contact us.

If you liked this video and would like to see more please let us know.

Note: Please note that the video is is approximately 60mb in size and in Windows Media Video File format (.wmv). Please make enquiries with your internal IT department prior to downloading to ensure that by downloading this video you are not breaching any of your businesses policies.

Top 5 Bankruptcy Regions for the September Quarter 2018

Thursday, November 29, 2018 - Posted by Michael McCulloch

We saw last month that Personal Insolvencies Fall in September Quarter 2018 however how does this breakdown across a suburb by suburb basis across Australia?

This month we look at the top 5 regions with the highest number of bankruptcies.

New South Wales

Across greater New South Wales we saw 1,371 people entering into bankruptcy however this is a reduction of 5.1% compared to the previous quarterly statistics.

Suburb	Region	New Bankruptcies
Campbelltown	Greater Sydney	71
Wyong	Greater Sydney	66
Mount Druitt	Greater Sydney	65
Newcastle	Rest of New South Wales	58
East Lake Macquarie	Rest of New South Wales	37

Is It Legal to Charge Interest to a Debt?

Thursday, November 29, 2018 - Posted by Michael McCulloch

It's a question that we come across on a regular basis from our commercial clients and one that is more common than you may think.

Interest is the price (charge) paid for the use of someone else's money. For commercial clients, it is a charge that your clients pay when they don't pay that your invoice by the due date. When they don't pay you on the due date, they are effectively borrowing money from your organisation.

While those in the finance industry often have very well worded Contracts and Terms and Conditions that allow the calculation of an annual percentage rate (APR) many small business owners struggle to understand the requirements and while they understand the practical value of incurring interest they worry about the practicalities of applying additional interest fees or charges to an outstanding account.

Can you charge interest to a debt?

The short answer to this question is yes provided your terms and conditions permit it. There are however strict requirements you must meet in order for your claim for interest to be legally collectable, and we would recommend you seek legal advice to ensure your interest charges are recoverable.

What are the requirements?
There should be a provision in your Contract, Agreement and / or Terms and Conditions for the calculation of interest that the customer has agreed to prior to monies being advanced for the goods or services you have provided. This provision should be easy to understand, outline to the customer exactly when interest charges may apply, how they are calculated, the date that interest may start to accrue on the debt and should be a fair and reasonable rate.


What is a fair and reasonable rate?

A fair and reasonable rate can be difficult to determine however most businesses charge between 5% to 10% per annum. The interest charge should be at a rate that is a genuine estimate of the cost of the late payment to your business (ie your banks overdraft rate). Anything higher than this may not be enforceable. 

The Local Court of NSW currently prescribes a pre-Judgment interest rate of 5.50%. This rate is 4.00% above the cash rate last published by the Reserve Bank of Australia and is reviewed every 6 months. The current rates can be found at Interest Rates Applicable After 1 July 2010.


Should you charge interest?

Charging interest to a debt can have pros and cons, and is ultimately a commercial decision. Where a customer knows that interest may be charged on an overdue account or invoice it is often incentive enough for them to pay on time. On the other hand you may alienate a particular customer who may take their business elsewhere. While you may offer a better product or service than your competitor, applying interest to a debt could be the very reason you lose business.

In a situation like this it is often better to communicate to your customer that their payment is late and granting an extension for payment before charging interest and being flexible enough to agree to waive these charges if a customer can be retained.


Is there a minimum amount I can charge interest on?

Queensland Bushfire Emergency Relief November 2018

Wednesday, November 28, 2018 - Posted by Michael McCulloch

With severe bushfires impacting those in the communities surrounding the Gladstone, QLD region we are granting moratoriums to those in impacted areas.

Our staff have been made aware of the impact on these regions however owing to the overall size of the regions being impacted you may still be contacted. Please ensure that you communicate your situation to us if it is safe to do so. Where possible we will attempt to negotiate payment extensions or make alternate arrangements.

Personal Insolvencies Fall in September Quarter 2018

Tuesday, October 30, 2018 - Posted by Michael McCulloch

The Australian Financial Security Authority (AFSA) are reporting that personal insolvencies fell 9.7% in the July to September 2018 quarter.

The personal insolvency statistics for this quarter show that the number of new total personal insolvencies reduced from 8,194 to 7,400 with only NSW recording a rise of 0.4% The rise in NSW has been attributed to an increase in consumer Debt Agreement Proposals (DAPs) and Personal Insolvency Agreements (PIAs). Bankrupties were at a record quarterly low in South Australia with Tasmania also recording their lowest quarterly level of bankruptcies since 1989.

Business related personal insolvencies, where an individuals bankruptcy is directly related to his or her proprietary interest in a business, represented 17.8% of total bankruptcies filed Australia-wide with the Australian Capital Territory recording the greatest increase across all States and Territories of 8.33% over the last 12 months.

Further information about the statistics can be read online at Guide to Personal Insolvency Statistics.

Is It Time To Review Your PPSR Registrations?

Tuesday, October 30, 2018 - Posted by Michael McCulloch

Do you know when your interest on the Personal Property Securities Register (PPSR) is due to expire?

It can be one of the more challenging things that we come across in the debt collection industry. A customer has relocated several times over a number of years however the debt is believed to be secured by an asset which, if repossessed, may finalise the debt or may entice the debtor to enter into a repayment arrangement which is maintained. Upon conducting a search of the PPSR it's then found that the security interest has lapsed. You now have essentially an unsecured debt with very little or no bargaining power.

While many organations used to employ a specialists securities agents this role has gradually been phased out and is now considered a day-to-day role of administration staff who may or may not keep an accurate register and may not know or realise the implications of the interest lapsing especially where a debt has been written-off. If this sounds familiar did you know that if you have a PPSR login that you can generate a report called Registrations Due to Expire?

The report includes information such as:

• the SPG (Secured Party Group Number);
• registration number;
• end date and time of the security interest;
• collateral type;
• collateral class;
• serial number and serial number type; and
• details of the Grantor