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Debt Collection News

Released every month our debt collection blog contains news, stories and tips to keep you informed.

SA Govt to reduce unpaid debts

Tuesday, September 08, 2009 - Posted by Philip Harvey

A review by the South Australian Government has looked at ways to reduce unpaid fines / debts. The recommendations from the review include:

  •  Impounding cars until debts are paid
  •  Obtain Credit Card details when registering a vehicle or renewing a license
  •  A possible prison sentence for repeat offenders
  •  A debt recovery body be setup to recover the the debts / fines instead of the using the court system
  •  Remove a constraint on fine collection officers that prevents them from seizing assets listed under the Bankruptcy Act
  •  Publishing names of repeat offenders
  •  Requesting the Federal Government to consider giving state collection agencies greater access to Commonwealth data the track down the people avoiding the fines / debts.

These are interesting methods that the South Australian Government review has raised. If you compare this to the direction that the National Credit Code has taken (increasing consumer / debtor protections), the State Government appears to be heading in the opposite direction (decreasing protections / ways of avoiding debts).

The Publishing of names is an interesting point given the obligations of the Privacy Act.

It will be interesting to see what actions the South Australian Government ultimately take, and comparing this to the National Credit Code.

National Consumer Credit Reform License Requirements

Saturday, August 01, 2009 - Posted by Philip Harvey

ASIC recently launched a Consultation Paper on Training and Competence for credit licensees. 

The Key points from the ASIC paper are;
"The new credit regime proposed by the National Credit Bill is aimed at boosting consumer protection and raising standards in the credit industry. It requires credit licensees to maintain their competence and ensure their representatives are adequately trained to engage in credit activities. In granting Australian credit licences, ASIC must have regard to whether particular people are 'fit and proper'. We will look to these people to demonstrate whether the credit licensee is competent as a whole. While credit licensees must determine for themselves how best to meet their obligations, we are proposing to set out our expectations as to:    
  • Credit licensee competence;
  • Training requirements for representatives; and
  • Transitional arrangements
To reinforce the training and competence requirements, we propose to impose some standard licence conditions." Impact to Collectors Under Clause  47(1)(g) of the National Credit Bill the credit licensee must ensure all represtatives are adequately trained, and competent to engage in credit activities authorised by their license. The Key Points that ASIC have drawn with regards to this are are;

"Under the National Credit Bill, credit licensees must ensure that their representatives are adequately trained, and are competent, to engage in the credit activities authorised by the licence. Generally, we think that credit licensees should determine for themselves what is appropriate initially and ongoing training for their representatives. However, we propose that representatives working as mortgage brokers should hold at least a Certificate IV in Financial Services (Finance / Mortgage Broking) and should undertake 20 hours of continuing professional development a year. "

ASIC is deliberately not prescribing prerequisite qualifications or ongoing training requirements for representatives at this time.

But what does this mean for Collectors? Your licensees need to ensure you are trained & competent to engage in credit activities which includes collections. Your licensees need to determine what the basic competency & ongoing training requirements are. Additionaly training programs will need to be documented.

The full ASIC release can be viewed here.

Building Societies, Credit Unions and Retail Banks Sign Up to Help Borrowers in Distress

Saturday, August 01, 2009 - Posted by Philip Harvey

Following from last months article on Hardship, The Federal Treasurer (Wayne Swan) recently announced "that all 144 retail banks, building societies and credit unions have signed up to the Government's Principles to assist borrowers who are experiencing financial difficulty as a result of the global recession." 

Options available under these principles to assist borrows in distress include;

  • postponement for up to 12 months the dates on which payments are due under a mortgage contract (with interest to be capitalised into the loan);
  • an extension of the period of the contract and a reduction in the amount of each payment due under the contract;
  • interest-only breaks on loan repayments;
  • fee waivers;
  • extending the loan term and reducing repayments;
  • reducing the limit available under the credit contract and
  • one off temporary overdrafts for short term needs

Additional to this is the Hardship threshold limit increasing to $500,000.

All members of the Association of Building Societies and Credit Unions (ABACUS) have signed and agreed to these principles. ABACUS have released these principles which are located on this link.

To view the full press release made by the Treasurer click here

Further the the Treasurer's announcement and ABACUS accepting the principles, an ASIC press release under the new National Consumer Credit Bill has advised that ASIC's expectation is that Credit Licensees have a contact number for hardship applications. 
ASIC's comments;
"We consider that credit licensees should have clear and effective arrangements to assist borrowers who are facing financial hardship. This includes having a dedicated telephone number for consumers to make hardship applications."

The full ASIC release can be viewed here (ASIC consultation paper 112) 

Court Instalment Orders vs Contractual Obligations

Saturday, August 01, 2009 - Posted by Philip Harvey

Can the Local Court Registrar accept an Instalment Order from a debtor where the amount offered is less than the contractural obligations?

But the amount accepted by the Court means the arrears on the loan will continue to grow, is there anything I can do?

We have had a number of questions on this topic, in this article we'll go through the process.

Can the Local Court Registrar accept an Installment Order from a debtor where the amount offered is less than the contractural obligations?

The short answer to this question is yes, they can.

When the Registrar responds to a debtor attending the Local Court, an examination is conducted. When determining if the debtors proposed Instalment Order is an acceptable amount, the Registrar is reviewing;

  • If the proposed amount is enough to pay the court interest (important note; Court Interest is Simple Interest calculated on the balance of the judgment debt only ie - it is NOT compounding). If the instalment amount will not cover the interest, generally the Instalment Order will be rejected;
  • The debtors capacity to repay the Judgment Debt after reasonable living expenses;
  • The amount of time it will take the Judgment Debt to be satisfied. Where the intsalment amount will not pay back the Judgment Debt in a reasonable time frame, the Court will generally reject the installment order.
  • History of Instalment Orders being maintained with the Local Court. If the debtor habitually defaults on court installment orders, the court will generally reject the installment order.

Note that at no stage does the local court ever refer to the Contractual Obligations (Loan Contract - contracted repayments) when determining an acceptable amount. The Court views the debt from a completely different perspective - that is the Judgment Debt.

But the amount accepted by the Court means the arrears on the loan will continue to grow, is there anything I can do?

Yes, there is something you can do. However you will need to think long & hard to determine if you actually want to......

You can lodge an objection to the Instalment Order with the Local Court. The Local Court will then set a hearing date which can be up to 3 months away. When the hearing does finally take place, a solicitor must be in attendance to act on your behalf.

Our experience in this process is that unless you have exceptional circumstances (eg Debtor misleading the Local Court), this is a costly and time consuming process with no guarantee of a positive outcome.

REVS - Putting Them On and Keeping Them Current

Wednesday, July 01, 2009 - Posted by Philip Harvey

We have recently had 2 different examples where the security of a loan has been jeopardised and our ability to repossess the security has been limited through REVS listings not being performed in a timely manner. 

The scenarios were:

  1. REVS Listing placed 4 hours after the finance was providedIn this case example, a debtor applied for a secured car loan. The loan was granted on the basis of the security. When the funds were then provided to the debtor, the interest in the motor vehicle was not immediately listed on REVS. The listing was placed some 4-5 hours after the debtor had already received the funds, and driven the motor vehicle off the dealers lot.
    The debtor then proceeded to drive the motor vehicle down the road to another car dealer & immediately sold the vehicle. When the 2nd dealer completed the REVS check, there were no interests noted on the motor vehicle.
    Subsequently, payments on the loan were defaulted.
    We were not able to effect repossession of the motor vehicle under the above circumstances, with clear title being received by the 2nd dealer by means of a REVS check. Without going into the fraudulent activity in this example, subsequent collection of the loan to mitigate any loss is more difficult without being able to realise sale proceeds from the motor vehicle.
    To avoid this problem, we suggest that as part of a checklist before the funds are released, that you register your interest on REVS.
  2. A REVS listing lapsed before it is renewed.
    The financial provider had provided a secured loan to a debtor and listed their interest in the security on REVS. Repayments were being met for a long period of time. The interest in the security on REVS lapsed, and was not renewed by the financial provider for 7 days.
    During this period where the interest was not noted on REVS, the security was sold / transferred to an associate of the debtor & payments were subsequently defaulted.
    We were unable to effect repossession as the new owner was able to produce a REVS check showing clear title to the security.

It is therefore important to ensure that your listing with REVS is current & does not lapse

Debt Collection Newsletter

Wednesday, July 01, 2009 - Posted by Philip Harvey

LCollect has launched a Newsletter - Collections. This newsletter will cover all issues pertaining to Debt Collection, including real issues and problems faced by you. The objective of this newsletter is to keep our clients up to date with the latest in the collections industry by providing current topical information in collections and useful collections tips.

To sign up to future editions of Collections please enter your name & email address to the Collections sign up section located on the right hand side of this website so we can provide you with all the latest news, tips and events.

If you have a current issue or problem and would like more information, please contact us so we can include this in our next edition of Collections. 

We hope enjoy this new forum of information.

New and Updated Website

Wednesday, July 01, 2009 - Posted by Philip Harvey

Check out our new & improved webite at The new website provides all the latest news relating to debt collection eg; Local Court Processing Times, ITSA updates, breaking industry news like the National Consumer Credit Bill.

Increase in Debt Levels

Wednesday, July 01, 2009 - Posted by Philip Harvey

Present feedback we have received from our clients is that their delinquency ratios are at all time lows, with the majority of our clients below 1% in total arrears compared to their total loan portfolio. Whilst there is no one reason for this, we can generally say this is a result of our clients lending policies and avoiding broker originated finance.

Fujitsu Morgan white paper  reported;

"The total system dynamic LVR (i.e. total housing mortgage debt to the market value of Australian residential property) has risen from 12.1% in December 1992 to 24.2% in December 2007. Excluding the estimated 35% of residential properties with no debt, the dynamic LVR on geared residential properties is 36%. To highlight the household’s vulnerability to rising interest rates via this increased “gearing tolerance”, each 25bp increase in interest rates increases the interest burden on home loan borrowers by an estimated A$1.75bn (i.e. A$924bn x 76% x 0.25% = A$1.75bn). 
To highlight the household’s vulnerability to rising interest rates via this 
increased “gearing tolerance”, each 25bp increase in interest rates increases the interest burden on home loan borrowers by an estimated A$1.75bn (i.e. A$924bn x 76% x 0.25% = A$1.75bn)".

With interest rates having reduced significantly, the stress being experienced by debtors has reduced significantly. However the media & economists are already predicting that there will be no further interest rate cuts, and that interest rates will start to increase in 2010. It will be interesting to see how this economic outlook impacts bad debts in the years to come.


Wednesday, July 01, 2009 - Posted by Philip Harvey

In the current financial climate, we have been receiving a significant increase in the number of questions about Hardship, what to look out for, when it applies and what must be done. In this article we go through the basic steps and some scenarios of what to look out for.

A debtor does not have to formally apply for hardship. Once the Financial Service provider is aware of the debtors financial circumstances, hardship must be offered. We have come across many instances where the financial service provider has advised us that hardship does not apply because the debtor has not formally applied for it. The Banking & Financial Services Ombudsmen has explained this previously (detail below).

The current threshold for hardship is $345,290. If the loan is above this amount, hardship does not formally apply, but as per the Ombudsmens advise, should still be considered.

Banking and Financial Services Bulletin 53 March 2007;

Section 66 of the UCCC gives debtors with a loan of not more than $305,910 ($125,000 in Tasmania) the right to seek a variation to their credit contract where:

  • They are unable to meet their contractual obligations because of illness, unemployment or other reasonable cause; and
  • There is a reasonable expectation of being able to repay the debt if the contract is varied.

A debtor may seek one of the following variation

  • An extension of the term of the contract and a corresponding reduction of payments
  • An extension of the term of the contract and postponement of payments during a specified period; or
  • Postponement of payments during a specified period with no extension of term (which would mean higher repayments after the postponement period).

There is no obligation on the credit provider to agree to the variation. However, if a credit provider does not, a debtor can apply to a relevant court or tribunal for an order varying the contract in one of these three ways.

The BFSO observes that, in contrast to the UCCC provisions, the hardship variation provisions under the Code are not limited to specific circumstances or outcomes. Neither are they limited to consumer lending, nor by reference to loan amount.

Clause 25.2 of the Code provides that a subscribing bank must inform a customer of the UCCC variation provisions if the provisions could apply to the customer's circumstances. In the BFSO's view, informing a customer of the UCCC provisions includes telling the customer at the time of rejecting a hardship variation application that they can apply to a relevant court or tribunal under s68 of the UCCC for an order changing the contract. This information should be relayed to the customer, irrespective of whether or not the credit provider considers that such an application would succeed.

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