1 in 5 Single Repayment Car Loans Result In Repossession

The Consumer Financial Protection Bureau (a consumer protection watchdog in the US) undertook a study of single repayment car loans.

These loans are typically short term loans for consumers in severe financial difficulty and are banned in half of the states in the US. Their existing car is offered as security on a loan that can result in very high interest rates of up to 300% (well in excess of the mandated cap in Australia on interest rates).

By taking out such a loan, according to the report, consumers end up in a downward spiral of debt that they cannot escape. Loans are often taken to repay the initial car loan.

These loans became popular with lenders following regulatory caps in payday lending rates. Like Australia, the US is also investigating the payday industry with this style of loan also under review.

Source: CFPB Press Release

Google Bans Payday Lending Advertising

From 13 July 2016, Google will place a global ban on short-term loan advertising from its websites.

Google Director of Global Product Policy, David Graff, stated "Research has shown that these loans can result in unaffordable payment and high default rates for users so we will be updating our policies globally to reflect that.....We'll continue to review the effectiveness of this policy, but our hope is that fewer people will be exposed to misleading or harmful products."

The ban will apply to credit where repayments are due within 60 days.

This follows a recent case where ASIC forced Nimble to refund $1.6M to consumers for being not engaging responsible lending practices. Read more about this here.

The industry is under review in Australia with practices being closely examined.

Source: Google Public Policy Blog

Debt Collectors Resort to Violence in Russia

With a recession in Russia following International Economic Sanctions (over the Ukraine / annexation of Crimea) and a collapse in the price of oil, there are now over 11 million Russians behind in their loan repayments.

In December 2015, a debt collector made a bomb threat against a kindergarten teacher which resulted in an evacuation of the classroom and police sniffer dogs sweeping the area.

In late January 2016 it was reported a collector chasing a 4,000 rouble debt, approximately AUD$75, threw a fire-bomb through the debtors window which badly burnt a 2 year old boy.

The source of the issue appears to be small micro lenders that are operating in an unregulated segment of the collection industry in Russia targeting the most vulnerable consumers. We note that ASIC is targeting low value payday lending in Australia.

Legislators have made statements that collection agencies should stop operating, with some wanting to introduce legislation that would prevent anyone from collecting a debt aside from the original creditor.

Culturally there are vast differences between Australia and Russia, however it is interesting there is a common thread of the cause of financial hardship on vulnerable consumers.

Romania Considering Reforms to Debt Collection Industry

In Romania, the activity of debt collection companies has not been regulated. The existing compliance framework makes no provisions on actions debt collection companies may take, including harassment. In reforms being considered by the Government:

• Banks would no longer be able to assign debts to companies they own
• Banks would not be able to refer debts for collection to companies they own
• Debt collection companies would not be allowed charge interest on debts they acquire
• Debt collection companies would not be allowed to harass borrowers on debts they acquire.

Belgium debt collection appeals against judgments do not stop enforcement action

In Belgium, in changes recently introduced, appealing against a Judgment debt no longer ceases enforcement action by the Judgment Creditor against the Judgment Debtor. These changes were introduced because of a big backlog in the appeals list resulting that were taking too much of the courts time to address.

Though the Creditor no longer has to cease enforcement action, there are a couple of points to consider;

• Should the court ultimately find in favour of the debtor, any funds obtained under continued enforcement action will have to be paid back. The debtor could also claim for compensation if they can prove any prejudice as a result of the enforcement.

• The debtor has an option to stop the enforcement action whilst an appeal is in place by placing the debt owed in an account that is held "in trust" until a final judgment is obtained.

It will be interesting to see how this practice unfolds. Certainly where the debtor has a demonstrated capacity to pay this process should remove frivolous defences.

It will be interesting to note if any unintended consequences arise flowing from this, as there are some real practical benefits from these changes.

Singaporean Debt Collector Jailed and Caned

A Singaporean debt collector who resorted to illegal collection methods in the field has been sentence to 4 years and 3 months in jail, ordered to be given 15 strokes of the cane and a SD$5,000 fine.

The debt collector become embedded with a collection agency after racking up a debt of SD$2,000 with a loan shark who would deduct SD$150 from the outstanding debt for each collection assignment he took on.

The collection methods in the field that saw the debt collector convicted included:

• Locking gates of the debtors units with bike locks
• Using graffiti
• Spilling / splashing paint
• Trespassing
• Putting up banners
• Shouting at debtors
• Physical violence

Debt Collection Letters and Barcodes

In Pennsylvania, a Judge has ruled that a debt collection agency has breached the Fair Debt Collection Practices Act (FDCPA) by printing a bar code on the outside of an envelope.

This is because of smartphone bar-code readers and the increases the risk if identity theft. When the bar code is scanned, it reveals the reference number of the debt under collection.

The FDCPA provides that only a debtors address should be on an envelope (s1692f(8))

This follows similar rulings pertaining to information on an envelope other than the debtors address including:

• QR codes not being permitted on the outside of envelopes, where the QR code revealed the name of the Debtor.
• Account reference numbers not being permitted as they could reveal the financial position of the debtor.

NZ Privacy Commissioner Cautions Disputed Accounts

In New Zealand, the Privacy Commissioner has cautioned companies against referring debts to collection agencies whilst they are under dispute.

In the matter Taylor v Orcon Ltd [2015] NZHRRT 15, a telecommunications company, Orcon, advised a customer that all amount owing had been waived. The amounts waived related to unsuccessfully attempting to connect Orcon's broadband service, with the modem supplied and connection never working, with no access to the internet ever established.

Subsequent to waiving all fees and charges, an invoice was received from Orcon which was immediately disputed. Further account statements were received and to compound matters the customer was laughed at when requesting to talk to a manager.

To compound the matter, Orcon then referred the account to a debt collection agency for collection, which was again disputed by the customer. Whilst initially placed under HOLD, the matter was taken off hold with a partial credit, and the balance listed on the customers credit report.

This adverse credit listing then prevented the customer from obtaining rental accommodation forcing the customer to pay Orcon to have the listing removed, with Orcon subsequently refunding the customer this amount. The adverse credit listing also impacted on his finance facility with GE Money.

Having regard to all the circumstances, an order to pay the customer NZ$10,000 for the impact on his credit rating and NZ$15,000 for the humiliation, loss of dignity and injury to feelings was made.

Bank of America Fined US$30M Violating Consumer Protections

The Bank of America was recently fined US$30M for violation of consumer protections in the US.

The bank breached the Servicemembers Civil Relief Act ("SCRA"). The purpose of the SCRA is to prevent military personnel who are in active service from abusive lending and debt collection practices. These practices were affecting non-home loan facilities.

The bank has undertaken to improve its compliance framework to:

• Correctly determine if military personnel are eligible for SCRA benefits 
• Verify the military status before seeking Judgments
• Calculating the benefits under the SCRA

New Zealand introduces compulsory licensing for Repossession agents

The New Zealand government has made it compulsory for all repossession agents to be licensed and for all repossession employees to hold a certificate of approval under the provisions of the Private Security Personnel and Private Investigators Act 2010 (PSPPI).

This change comes into effect from 6 June 2015. Agents who do not comply can be fined up to NZ$40,000.

Licenses might not be issued where:

• You or your company have convictions in the last seven years for offences relating to dishonesty, violence, or drugs; or
• You or your company have had your licence or certificate cancelled or suspended in the past; or
• You have been ordered to be in a hospital because of a mental condition.

This article was sourced from the Ministry of Justice.