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At LCollect we believe that knowledge is power. Every month our debt collection blog gives you practical tips, stories and news from around Australia and the world.

Enforcement of Judgment While EDR Investigates

Thursday, March 29, 2018 - Posted by Michael McCulloch

As you may be aware once a debt has been referred to External Dispute Resolution ("EDR") all collection action should cease pending the complaint or dispute being resolved. What happens though when you have a Judgment and a dispute or complaint is lodged?

Both of the current EDRs in the Financial Ombudsman Service ("FOS") and the Credit and Investments Ombudsman ("COSL") have Terms of Service which clarify their position when it comes to a Judgment with both indicating that where Judgment has been entered they have no jurisdiction but how does this work in a practical sense?

In our quest for answers we reviewed some of the outcomes where Judgment was entered and a complaint or dispute was lodged with an EDR. In our search we came across a Review by COSL in August 2016. The original complaint related to:

  • a Security Certificate breach that appeared on the FSPs website on or around June 2012; and
  • a Default Judgment obtained by the FSP from the Local Court of NSW on or around October 2015 to recover $47,454.49 from the consumer.
The outcome of the review has been transcribed below:

The claim that the FSP committed a breach of the consumer’s privacy by not remedying the security certificate breach
The claim that the consumer’s privacy was breached as the FSP did not remedy the security certificate breach. We would not be the appropriate forum to consider complaints about security certificates. Based on the available information, we consider it more appropriate that the consumer
direct this claim with the Office of the Australian Information Commissioner. The OAIC can investigate privacy complaints covered by the Privacy Act 1988 (CTH) and also complaints relating to handling of the consumer’s personal information by the FSP.


The consumer’s claim that the Statement of Claim was issued to the wrong address despite the consumer updating the consumer’s new address on xx July 2015
The FSP has provided us a copy of the judgment by the Local Court of NSW against the consumer dated xx October 2015 and a copy of the notice dismissing the consumer’s motion to set aside the default judgment dated xx May 2016. A court has ordered that the consumer pay the judgment debt. We cannot deal with a complaint if the subject matter of the complaint has been determined by the court. This is because we are not able to make a decision that would be seen to conflict with a decision of the court. Furthermore, only a court is able to set aside a court’s judgment. If the consumer wishes to set aside the default judgment, the consumer’s claim would be better raised with the Local Court of NSW.

The consumer’s claim that the FSP attended the hearing on xx May 2016 despite being aware of the complaint being open with CIO
We received the consumer’s complaint against the FSP on xx May 2016. When we receive a complaint, the financial services provider is required to cease enforcement action for as long as we deal with the complaint. On or around the same time the consumer lodged the complaint with us, the consumer approached the Local Court of NSW to set aside the default judgment obtained by The FSP. Both the parties attended the hearing to set aside the default judgment on xx May 2016. The court dismissed the consumer’s motion to set aside the default judgment and upheld its original default judgment against the consumer dated xx October 2015. We do not consider that the FSP breached our Rules by attending the court hearing. This is because the FSP already obtained a judgment against the consumer on xx October 2015 and was attending the court to respond to the consumer’s notice to set aside the default judgment. We are unable to find that this amounted to a continuation of enforcement action as The FSP is entitled to defend itself to legal proceedings commenced by the consumer.


With the consumer being unhappy with the Review the matter was referred to the Ombudsman for Determination. The Ombdusman concluded in their Final Decision:

Decision
49. For the reasons set out in the Review and this Determination, I find that the consumer's claims have either not been made out or are outside our jurisdiction.

In summary it is now our opinion having read the Review, Determination and Decision that while enforcement of a Judgment Debt cannot continue while a complaint or dispute is before EDR that if a Defence or a Motion is filed by a consumer in the Court that the FSP has the right to respond to an action raised by a consumer.

Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relied on in any way.


Council to Auction Properties With Overdue Rates

Thursday, March 29, 2018 - Posted by Michael McCulloch

Back in our February 2017 edition of Debt Collection News we reported councils considering home repossessions to recover unpaid rates in the Bowen Basin Local Government area.

This month it is being reported that Bundaberg Regional Council has listed several properties for auction for rate arrears. A council spokeperson said that in November 2017 council authorised a total of 43 properties to be sold at auction representing outstanding rates of just under $475,000. Of the 43 properties only 7 remain however according to Council many ratepayers will settle their debt prior to the hammer falling.

In a statement a council spokesperson said, "Ratepayers who find themselves facing the auctioning of their property have ignored numerous phone calls, letters and approaches from council's debt management team and authorised recovery agency. It is quite normal for the outstanding rates on a majority of properties to be settled prior to auction".

The auction is scheduled for Thursday, 12 April 2018.

Source: NewsMail - March 2018


FSPs Filing Police Reports [Reminder]

Thursday, March 29, 2018 - Posted by Michael McCulloch

We have again received notification from the Credit and Investments Ombudsman ("COSL") that this practice seems to be ongoing. From their March 2018 edition of CIO News we came across this reminder -

We have recently received a number of complaints against consumer lease providers, where the FSPs have reported their customers to the police. They were reported on the basis that the goods associated with the lease, were stolen as these customers had defaulted on payments.

We would like to remind our FSP members that they have enforcement rights under the National Credit Code. We would consider these as more appropriate when enforcing their rights due to non-payment. We note that this is despite a number of states have broad definitions of stealing and fraud under their criminal codes.

A decision to report goods as stolen, rather than pursue standard collections or enforcement action, does not demonstrate good industry practice.

In our November 2016 edition of Debt Collection News we reported about this very issue in Financial Service Providers Argue Criminal Proceedings Outside Ombudsman Jurisdiction.

As we indicated in our previous article it still remains unclear as to the final outcome of the investigation by COSL however as they noted in their reminder enforcement of the debt should be undertaken via the NCC and not by the police.

Source: CIO News - March 2018


COSL Release Unjust Transactions Position Statement

Thursday, March 29, 2018 - Posted by Michael McCulloch

Recently the Credit and Investments Ombudsman ("COSL") have recently released their Position Statement regarding unjust transactions.

The Position Statement covers areas such as:

  • what is unjustness;
  • how they consider unjustness;
  • how they consider low docs loans in an unjustness complaint;
  • how they consider reverse mortgages in an unjustness complaint;
  • what are some of the factors listed under S76(2) of the NCC;
  • the information they require to consider unjustness;
  • what relief is available for an unjust Contract; and
  • interpretation

You can download a copy via our website.


$10 Million Gym Fee Membership Error

Thursday, March 29, 2018 - Posted by Michael McCulloch

A Perth resident, Michael Reed, received received a letter of demand from a debt collection agency for a gym membership from his local Anytime Fitness.

While this isn't entirely unusual with the make-up of these Agreements when memberships are cancelled, Mr Reed was demanded to pay $10,296,696.40. This is the equivalent to a membership of at least 20,000 years. In a statement to the media Mr Reed said, "I had a heart attack when I opened it. The guys at work thought it was great. They suggested I set up a GoFundMe page. I guess I know the price for perfect abs is out of my reach now."

Once the issue was identified Mr Reed said that Anytime Fitness were very helpful and the collection agency confirmed that there was an administrative error, apologised and paid his gym membership for a year as compensation.

Source: Perth Now - March 2018


Credit Repair Companies and Removing Defaults

Thursday, March 29, 2018 - Posted by Michael McCulloch

Recently we have again seen an influx of requests by credit repair companies requesting that payment defaults or Judgments be removed from consumer credit files.

Typically these requests are received after a debt has been paid in full or settled with consumers being told by credit repair companies that they can remove a default. Such a request usually involves the credit repair company forwarding a default removal request and a signed privacy consent form with reference to Section 2.23 of the Credit Reporting Code of Conduct. Of interest in receiving these requests is a demand that the request be complied with within 10 business days. This is in fact incorrect in that the credit repair companies are making reference to the repealed Part IIIA of the CRCC:

That aside the formal stance from Equifax regarding the removal of defaults can be found on their page Can I Have Information Removed from My Credit File?

Generally speaking a default will only be removed if:

  • the entire listing is incorrect;
  • the debt is Statute Barred;
  • the listing was a result of unavoidable circumstances and a new arrangement entered into with the Credit Provider

It is our recommendation that should such a request be received that:

  • you conduct a thorough review of your Code issued Notices to ensure strict compliance including the timing of the issue of each Notice;
  • copies of any such Notices be forwarded to the credit repair company;
  • it is clarified that the listing will not be removed; and
  • that correspondence received from them quoting repealed Part IIIA of the CRCC could be interpreted as misleading and deceptive conduct and future references to this section may be reported to ASIC.

If you believe that you may require an opinion regarding the legality of any such request you can contact Collection Law Partners by phone or email to obtain written advice.


Image Source: Office of the Australian Information Commissioner - Privacy Business Resource 3: Credit Reporting - What Has Changed

Disclaimer: The information contained in this article does not constitute legal advice and should not be used as such. You should obtain your own independent legal advice before acting or relying on its content.


ANZ Breaches Responsible Lending Laws

Thursday, March 29, 2018 - Posted by Michael McCulloch

The Federal Court has recently published their reasons and finding for ordering Australian and New Zealand Banking Group Ltd ("ANZ") to pay $5 million for breaches of responsible lending provisions.

ANZ has agreed to pay the fine as part of settlement of the case which also saw them admitting to 24 breaches of responsible lending provisions of the National Consumer Credit Protection Act 2009 (Cth) for car loans approved by Esanda from 3 finance brokers. We covered the successful prosecution of 1 broker in our May 2017 editionASIC alleged that between July 2013 and May 2015 that ANZ failed to meet their obligations when it relied on payslips only included in 12 car loan applications to verify the consumer's income. ANZ claimed to have detected and reported the suspected fraudulent conduct by the brokers and that it disaccredited the individuals involved and no longer accepts applications from them.

In relation to the civil penalty proceedings the Federal Court found ANZ:

  • knew that payslips were a type of document that was easily falsified;
  • received the document from a broker who sent the loan application to Esanda; and
  • had reason to doubt the reliability of information received from that broker;
  • income is one of the most important parts of information about the consumer’s financial situation in the assessment of unsuitability, as it will govern the consumer’s ability to repay the loan;
  • while ANZ did not completely fail to take steps to verify the consumers’ financial situation, it inappropriately relied entirely on payslips received from these brokers; and
  • ANZ management did not ensure that relevant policies were complied with and, in the case of the contraventions involving one broker, no action was taken despite management personnel having become aware of the issues about the broker.

ASIC Deputy Chiarman, Peter Kell, said, "A consumer's income is an essential component in determining their ability to repay a loan. Lenders must take reasonable steps to verify a consumer's financial situation, and this includes checking the reliability of documentation that is provided to them. Lenders must be alert to the potential for documents to be falsified and ensure that their controls are sufficiently robust."

The Court has ordered ANZ remidiate approximately 320 car loan customers for loans taken out through the 3 broker businesses from 2013 to 2015 with ANZ:

  • offering eligible customers the option of entering into a new loan on mare favourable terms than the existing loan;
  • providing refunds to some customers who have paid out their loan or had cars repossessed; and
  • removing any default listings result from the loan.



Regulatory Change Ahead for Early Release of Superannuation

Thursday, March 29, 2018 - Posted by Michael McCulloch

In February 2018 the Australian Government released for consultation the draft regulations on the transfer of the early release of superannuation on compassionate grounds to the Australian Taxation Office ("ATO").

These regulations will provide the necessary administrative grounds to transfer the authority for the early release of superannuation on compassionate grounds from the Department of Human Services to the ATO with the draft regulations set to improve the integrity of the current process and to expidite the release of those funds to successful applicants. The Minister for Revenue and Financial Services, Kelly O'Dwyer, said in a statement, “The regulations require the ATO to directly notify a member’s superannuation trustee when it has authorised the early release of funds, removing the need for that trustee to independently confirm the amount authorised for release."
At what are often times of great stress and concern for the individuals involved, these changes will cut the administrative burden for superannuation trustees and will help successful applicants receive their authorised funds sooner.

The authority for the early release of superannuation is not the only potential upcoming change with new rules also set to be introduced regarding what early access of superannuation can be used for.

Under the current rules superannuation may be released on compassionate grounds for:

  • Medical transport;
  • Medical treatment;
  • Palliative care;
  • Modifications necessary for he family home or vehicle due to severe disability;
  • Forclosure of mortgage where the address is the mortgagor's principal place of residence; or
  • Pay for the costs associated with a dependant's death including funeral or burial costs.

Under the proposed changes superannuation may also be accessed for medical aids, rental expenses and dental expenses where other financial support avenues have been exhausted.


Recovering Debt Collection Costs

Tuesday, February 27, 2018 - Posted by Michael McCulloch

A water utility supplier in Queensland brings to the light the issue of attempting to recover debt collection charges from customers.

Queensland Urban Utilities have recently come under regulatory scrutiny after they were found to be charging a debt collection fee on their overdue debts. It is reported in the Courier Mail that they are currently clarifying their legal position but in the meantime will reimburse or fogive $180,000 in debt collection fees.

The Queensland Debt Collectors (Field Agents and Collection Agents) Act 2014 forbids the collection of debt collection costs -

s27 Recovery of Costs of Debt Collector
(1) A person must not recover or attempt to recover from a debtor the costs or expenses of a debt collector for performing a debt collection activity or a repossession activity.

(2) Subsection (1) does not apply to prevent a person who appoints a debt collector to repossess goods or chattels from a debtor from recovering the debt collector’s costs and expenses if the person has a right under an agreement with the debtor or otherwise to recover the costs or expenses.

(3) Costs or expenses recovered in contravention of this section may be recovered by the debtor as a debt.

(4) This section applies subject to the National Credit Code in schedule 1 of the National Consumer Credit Protection Act 2009 (Cwlth) .

(5) In this section— 
"costs" do not include—
(a) stamp duty; or
(b) legal costs fixed by, or payable under, rules of court or a court order.
"debtor" includes a person from whom goods or chattels may be lawfully repossessed.


Similar legislation applies in New South Wales and Victoria under the NSW Commercial Agents and Private Inquiry Agents Act 2004 and Australian Consumer Law and Fair Trading Act 2012:


NSW Commercial Agents and Private Inquiry Agents Act 2004

s19 Licensee Not to Charge Debtor for Expenses of Debt Collecting

(1) A licensee must not request, demand or collect from a person (the "debtor" ) any payment for the costs or expenses incurred by the licensee in connection with the collection from that person of money due under a debt.

(2) Any money received from the debtor by a licensee in contravention of subsection (1) may be recovered by the debtor from the licensee, as a debt, in any court of competent jurisdiction.

(3) This section does not limit any right that the person to whom the debt is payable (the "creditor" ) may have at law with respect to the recovery from the debtor of the creditor's costs in recovering the debt.


Australian Consumer Law and Fair Trading Act 2012
s52 Offence to Charge Debtor for Cost of Debt Collection

(1) A debt collector must not recover, or attempt to recover, from a debtor any remuneration or payment in connection with the collection of a debt including the costs and expenses of a debt collector for—
(a) finding or attempting to find goods or chattels of the debtor;
(b) repossessing or attempting to repossess goods or chattels from the debtor;
(c) collecting or attempting to collect a debt owed by the debtor.

(2) Subsection (1) does not apply in respect of a debt collector who is recovering or attempting to recover on behalf of a creditor enforcement expenses reasonably incurred by that creditor—
(a) if a credit contract allows the recovery of those expenses; or
Note
See section 107 of the National Credit Code.
(b) in the case of a debt that was not wholly or predominately accrued in connection with personal, domestic or household purposes, if a term of an agreement between the creditor and the debtor permits the recovery of those expenses.

(3) It is a defence for an offence against subsection (1) that the debt collector had an honest and reasonable belief that the enforcement expenses that he or she was recovering or attempting to recover did not exceed those reasonably incurred by the creditor.

(4) Any costs or expenses recovered in contravention of subsection (1)—
(a) may be recovered by the debtor as a debt; and
(b) if the debt collector is the creditor—
(i) may be set off against the debt; or
(ii) may be recovered by the debtor from the debt collector or the creditor.

(5) In this section—
"costs" do not include—
(a) stamp duty; or
(b) legal costs fixed by, or payable under, rules of court or a court order;
credit contract has the meaning given by section 4 of the National Credit Code;

"creditor" includes a partner, employer, employee, principal or agent of the creditor or a person who is in any way acting in collusion with the creditor;
"debt collector" means a person who engages in debt collection—
(a) as a principal or agent;
(b) as an employee of a principal or agent in exchange for salary, wages or commission;
"debtor" includes a person from whom goods or chattels may be lawfully repossessed.


For further reading we refer you to ACCC v Sampson [2011] FCA 1165.

The ACCC has previously written to agencies and Solicitors who act in the debt collection industry reminding them:

  1. If something is only a possible consequence of not paying a debt, you must ensure that you do not create an impression that it is a definite consequence
  2. Before asserting the right to payment of administrative and or legal costs you must ensure that you are aware of whether or not there is a legal entitlement to claim any such costs
  3. You cannot create an impression that a debt collection letter, demand or notice are documents which have been authorised by a Court or able to be filed with a Court.
For further clarification regarding the contents of this article or to have your Terms and Conditions reviewed so reasonable debt collection fees and charges may be collected please contact Collection Law Partners to discuss your requirements.

Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relied on in any way.

Comcare Increase Attempts To Recoup Overpayments

Tuesday, February 27, 2018 - Posted by Michael McCulloch

Comcare, a statutory authority of the Australian Federal Government as the insurer, regulator and scheme manager of the Work Health and Safety Act 2011 and the Abestos-Related Claims (Management of Commonwealth Liabilities) Act 2005, has allegedly increased their attempts to recoup payments for cases it previously accepted liability for.

Figures released to a Senate committee show an increase in overpayment letters being issued by 77% for the 2014 to 2017 period. Comcare has claimed that there has been no change in approach or policy that has led to the increase of the overpayment letters and claims that it is not clear if the increase in claims has impacted upon the figures. The agency did claim that while there may have been an increase in overpayment letters being issued that a record number of debts are also being waived or written-off. 

Manager for Slater & Gordon's Comcare team, Abraham Ghaleb, said, "It's absolutely terrifying for people and it's an abhorrent behaviour for a Commonwealth department. When I'm getting the evidence together [the prospect of an overpayment claim] always has to be in the forefront of my mind, 'is this a potential argument that Comcare will raise?' and 'how do I deal with it?"

Comcare has rejected any suggestion and improper behaviour and said in a statement, "Case reviews and debt recovery have had little impact on the Comcare scheme's financial position. The scheme achieved full funding (100 per cent ratio of assets to liabilities) in 2016-17 for the first time in seven years. The biggest drivers of this recovery were sustained reductions in new claims, a strong focus on early intervention and better return to work outcomes."

Source: The Canberra Times - February 2018



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