CIO Warns Against Tribunal

Thursday, September 29, 2016 - Posted by Michael McCulloch

Raj Venga, CEO of the Credit and Investments Ombudsman ("CIO") has expressed concern about a proposal by the Federal Government to establish a tribunal to hear complaints about financial service providers.

In a Statement Mr Venga said, "Australia is currently very well served by the existing dispute resolution architecture in financial services. The types of disputes referred to in the current debate about the need for a new body generally involve amounts that exceed the monetary limits of CIO and the Financial Ombudsman Service (FOS), and so have not been able to be considered by either scheme".

Mr Venga pointed out that any such tribunal would:

• Create a tax-payer funded right of appeal to the courts, defeating the objective to resolve disputes fairly, cheaply and expeditiously,
 
• Not have the multiplicity of access points for industry and consumer representation that the current structure affords,
 
• Not have specialised industry knowledge required for the sensible resolution of disputes,
 
• Be substantially more inflexible, and
 
• Not be capable of responding quickly to changes in relevant markets.

Time will only tell at this stage if this is the beginning of the end for External Dispute Resolution ("EDR") however we will continue to monitor the progress of any such move to abolish the EDR process.

Source: CIO Media Release August 2016

Garnishee Orders and the Weekly Compensation Amount

Thursday, August 04, 2016 - Posted by Michael McCulloch

We have had some situations of late where Garnishee Orders for Wages or Salary are being filed however the employer has been unable to comply with the Order as the Judgment Debtor is not earning over the Weekly Compensation amount.

This leads to a situation where deductions are not being made which means that deductions are not being made to reduce your debt.

What is the Weekly Compensation Amount?

s122 of the Civil Procedure Act states:

1. The amounts attached under one or more garnishee orders must not, in total, reduce the net weekly amount of any wage or salary received by the Judgment Debtor from the Garnishee to less than $447.70 as adjusted under Division 6 of Part 3 of the Workers Compensation Act 1987 .
1 (a). The amount of $447.70 referred to in subsection (1) is an 
"adjustable amount" for the purposes of Division 6 of Part 3 of the Workers Compensation Act 1987 .
2. In this section: 
"net weekly amount" , in relation to any wage or salary payable to a Judgment Debtor, means the amount payable each week to the Judgment Debtor after deducting any taxes or other sums that, pursuant to any Act (including any Commonwealth Act), are required to be deducted from any such money.

Effectively this means that the Judgment Debtor can retain an amount of $480.50 (effective from 01/04/2016).

What Are Your Options?

Several options remain to you if the Judgment Debtor is not earning over the Weekly Compensation amount however for the purpose of this article we will only discuss 2 possible solutions.

The most obvious solution is to have the Judgment Debtor apply for an Instalment Order at the Local Court. This offer for payment by the Judgment Debtor removes the protections that they have under s122 of the Act and deductions must be made for the amount that the Instalment Order is made for.

Alternatively you may consider, if you have details of the financial institution that the Judgment Debtor banks with, the issue of a Garnishee Order for Debts. This Order attaches to any / all monies held in the Judgment Debtors bank account with that particular financial institution and is not subject to s122 of the Act.

Need More Information?

If you need more information about enforcement of a Garnishee Order please contact us.

ACM Contact Stroke Victim Over Telsta Debt

Tuesday, June 28, 2016 - Posted by Michael McCulloch

In a most recent article on our blog we revealed that the ACCC had commenced Court action against ACM Group.

We can now reveal that in the case of the resident in a care facility that the debt for $5,768.53 was purchased from Telstra by ACM.

It has been alleged:

LCollect Mobile Portal

Wednesday, May 11, 2016 - Posted by Michael McCulloch

In our on-going commitment to offering our clients and customers the best possible online experience we have recently invested in the development and launch of our mobile portal which you can access by simply visiting www.lcollect.com.au via your smartphone or tablet.

These sites have been developed to work across several platforms including iOS for Apple, Android, Windows platforms and Blackberry. Our new mobile sites will automatically resize according to your screen size and the orientation of your device. With smartphones and internet enabled devices being so popular our mobile portal provides you, our client, and customers another avenue to deal with us and lessen the excuses customers may provide for non-payment of their debt.

For our clients we have provided a summary of our services, the ability to read our debt collection blog via Twitter and subscribe to our blog where you can have the latest debt collectio news, stories and tips delivered to your inbox each month.

Our customers are also well provided for with a majority of forms now being able to be completed including a Statement of Financial Position, Electronic Direct Debit and Authorisation of a 3rd Party.

Got a suggestion or an improvement? Let us know here.

Centrelink Code of Operations and Retaining 10%

Friday, December 11, 2015 - Posted by Philip Harvey

The past 2 months we've received a number of questions about retaining Centrelink payments to pay a debt.

The Centrelink code of operation position is clear that the default position is the most that may be retained is 10%, and this ONLY applies to debts that are overdrawn savings accounts.

You can read the full code here.

A copy of the purpose of the code is pasted below for your benefit (current as at September 2015)

Purpose of this Code of Operation

All parties recognise that the Australian Government provides payments to customers to ensure they are able to provide basic food and accommodation for themselves and their families. The aim of this Code is to ensure that recipients of income support payments and DVA payments have sufficient income to maintain adequate food and shelter. Participating ADIs agree that they will take this into account when considering the amount they should recover each fortnight for the repayment of the debt.

All parties also recognise that not all customers:

1. receive the statutory maximum amount payable for any income support or DVA payment (for example, means testing reductions);
2. have 100 per cent of their payments paid into an account with any ADI (for example, payment splitting); or
3. receive 100 per cent of their entitlement (for example, Commonwealth debt recovery).

Under this Code, the default position is that a customer should be able to retain at least 90 per cent of their income support payment or DVA payments in any fortnightly period. However, nothing in this Code prevents either:

• a customer and the ADI discussing and agreeing to any amount of repayment appropriate to the circumstances of the customer; or
• an ADI determining, after consultation with the customer, that a repayment amount of more than 10 per cent of that customer’s fortnightly payment is reasonable and appropriate in the customer’s circumstances. 

For clarity, where the ADI is unable to contact the customer about the debt, the maximum repayment amount that may be deducted from the customer’s fortnightly payment will be the amount equal to 10 per cent of that fortnightly payment.

A customer is able to request that their ADI reviews the repayment amounts should the customer's circumstances change.

Source: Centrelink Code of Operation

Postponement of Enforcement Proceedings

Tuesday, August 25, 2015 - Posted by Michael McCulloch

We often come across examples where requests are made to our office for the issue of Default Notices. Having reviewed the request we then find that the same debtors have been issued with the same Notices several times over the course of their loan.

Effectively as a Creditor you are teaching the debtor to pay upon receipt of the Default Notice and not as their Contract stipulates. The debtor will often make contact, make arrangements to clear the arrears however fall into arrears again. The next month you will be issuing another Default Notice, the debtor will contact and make an arrangement and the cycle continues. As a Creditor how can you end this cycle and take control of the account?

Under Section 94 of the National Consumer Credit Protection Act 2009 the debtor can propose an application, verbally or in writing, to postpone action under a Section 88 or Section 90  (i.e. they make an arrangement to clear the arrears). The application must be made by the debtor prior to the s88 or s90 Notice expiring.

As the Creditor you must respond to the request made by the debtor within 21 days of the application and advise of the decision, either accepting or declining the application, the name of their relevant EDR scheme and the debtors rights under the scheme.

What happens though if you wish to accept the debtors proposal but don't want to get caught in the cycle of issuing another Default Notice?

As a Creditor you can issue a Section 95 Notice of Postponement under the Act.

This Notice indicates to the debtor the conditions of the postponement and advises the debtor that the Creditor is not required to give any further Default Notice under the NCCP Act. The Notice however only applies to the debtor that originally negotiated the postponement and does not apply to other debtors, mortgagors or guarantors under the Contract unless these parties have consented to the negotiated postponement.

You can find out more about this service by contacting us.

MoneyHelp Victoria Fielding 100 Calls Per Day

Monday, August 24, 2015 - Posted by Michael McCulloch

MoneyHelp in Victoria, a free financial counselling service, has recently come out in the media claiming that they are fielding 100 phone calls a week for people in financial hardship with credit card debt.

In the past 3 months, on average, more than 50% of callers advised of $10,000 of unsecured credit card debt and 1 in 10 callers disclosed unsecured credit card debt of more than $50,000.

It was noted that on average at least 1 person a week was reported as trying to sustain $100,00 of debt while also managing at least 5 credit cards.

Recently the Consumer Action Law Centre has been pushing for more responsible lending and easier ways for consumers to cancel and switch credit cards as well as direct debits which, historically, consumers have found difficult to cancel despite requesting that the service provider do so.

While most continuing credit facilities had relatively small balances it was found that consumers are often enticed to increase their limits or transfer balances between cards following the advertisement of interest free periods and low introductory interest rates. While this may provide the consumer some relief in the short term, in the long term they often end up paying more as introductory rates revert to a higher interest rate and other fees and charges continue to accumulate on new purchases.

The Australian Bankers' Association said that there were strong measures in place to protect consumers including responsible lending laws and encourage those in debt to contact their Creditors to seek hardship assistance when required.

Source: The Herald Sun

Debt collection reflection for FY 2015

Friday, June 26, 2015 - Posted by Philip Harvey

With the conclusion of the financial year upon us, it is a good opportunity to reflect on the past 12 months and give some insights from our perspective into the industry, and reflect on some of the milestones and changes to the industry:

• The CIO's (previously COSL) refusal to deal with certain credit repair companies. This was a welcome change of approach. However we note that a majority of our consumer credit clients / AFSL licensed clients are members of FOS. To our knowledge this approach has not been replicated with FOS.  It will be interesting to see how legislators and regulators deal with this space moving forward. The ACCC has also identified this in its research report into the industry.
• Feedback from our clients is that competition to lend money is fierce at all levels. Those successfully marketing to their target market / niche are able to grow their lending portfolios.
• Generally arrears provisions are down. With interest rates at prolonged historical lows, clients are reporting exceptionally good arrears results. A large proportion of accounts that do get written off are bankrupts where no previous indication of financial distress was know with no opportunity to identify an account in hardship to assist the borrower. This is also reflected in historically low volumes of actions through the various courts. Interestingly in the courts, they are also experiencing a reduction in insurance claims.
• In December, a number of our clients for the first time initiated policies of halting all collection action (excluding phone calls, contact and reminder letters) in the lead up to Christmas, with instruction not to recommence until varying times in January. The principle reason cited for this was brand management and brand protection. (The natural flow on from this can be delays of 6-8 weeks in a matter such as obtaining vacant possession of a property which may raise other issues).
• In our commercial collection space, for new clients our biggest issue continues to be clients not correctly setting up their lines of credit, not performing basic company searches, director searches to properly inform themselves as to who they are dealing with. When these searches are performed and guarantees are taken, an asset search of the director is not undertaken to actually understand the benefit of the Directors Guarantee. What appears at first glance to be a good collection prospect unravels quickly once the proper searches are undertaken. Similar to consumer credit, some clients are experiencing no warning of clients financial distress until the appointment of a liquidator.
• The ACCC research paper into the debt collection industry is a must read for all parties in credit control and debt collection. We raised this last month, you can download a copy on this link.
• In NSW,  the Government released its report into debt collection, and QLD commenced a negative license regime for phone collectors in QLD.
• The ACCC and ASIC published a new guide to Debt Collection in July 2014. This provided new guidance in handling emerging technologies.
• The Privacy Principles were updated.