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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.

Defendant Defeats Plaintiff in Preferential Payment Claim

Thursday, June 28, 2018 - Posted by Michael McCulloch

In the matter of Heavy Plant Leasing Pty Ltd (In Liquidation) (ACN 151 786 677) [2018] NSWSC 707 (8 February 2018), a Creditor had been applying pressure to obtain payment which was not forthcoming despite several months of requests for payment.

Once the company had been placed in liquidation the liquidator filed proceedings in the Supreme Court, as the Plaintiff (HPL) , against Ms Christine Mancer who trades as Bildavoid Concrete Voidforming Systems (Bildavoid), as the Defendant, claiming to recover $152,609.79 made by HPL to Bildavoid in February 2013. The application was made under the s588FF of the Corporations Act to recover those funds as an unfair preference, insolvent transaction and voidable transaction. The most common way to defend a liquidators claim again unfair preference is to rely on s588FG(2) of the Corporations Act, commonly referred to as "the good faith defence". The basis of the defence is that the Creditor argues that they received monies in good faith and they did not know, or ought not to have known, that the company was insolvent.


In relation to Bildavoid's pressure in which to obtain payment, the Court said, "These are steps that are taken just as much by an unpaid creditor of a solvent debtor as they are by an unpaid creditor of an insolvent debtor. The fact that a creditor applies pressure of that order to secure payment does not, to my mind, illustrate that the creditor fears or apprehends that the debtor is insolvent. The degree of pressure exerted by a creditor does not speak of a suspicion of insolvency, because a creditor is as likely to exert pressure on a recalcitrant solvent debtor as on an insolvent one."

It is important in these matters that if you expect that a company may be insolvent and owes you money that you seek timely advice from a qualified legal practitioner.

Please note that this article is not intended to be legal advice. You should seek your own independent advice from a qualified legal practitioner.

ASIC Regulatory Guide 165 Internal and External Dispute Resolution

Thursday, June 28, 2018 - Posted by Michael McCulloch

The Australian Securities & Investments Commission (ASIC) has recently released a revised version of Regulatory Guide 165 - Licensing: Internal and External Dispute Resolution.

The guide, which should be read in conjunction with RG139, which is currently in an amended draft form, specifically updates the transitional arrangements for disclosure of AFCA contact details in final response letters and "delay letter". An extract of which has been reproduced below:

AFCA will commence receiving complaints about financial service providers (including superannuation trustees and RSA providers), credit providers, credit service providers or unlicensed COI lenders on 1 November 2018.

To promote consumer awareness of their rights to pursue a complaint in the transition to commencement of AFCA, these providers and lenders must:

• ensure that IDR final response letters and ‘delay letters’ (see RG 165.92) issued on or after 21 September 2018 and before 1 November 2018 include references to both the relevant predecessor EDR scheme (which will be able to receive complaints only up until 31 October 2018) and AFCA (which will be able to receive complaints on and after 1 November 2018)—we have set out example text below for IDR final response letters; and

• ensure that such letters issued on or after 1 February 2019 include references to AFCA but not the predecessor EDR schemes. Letters issued between 1 November 2018 and 1 February 2019 may continue to include references to both the predecessor EDR scheme and AFCA, provided it is clear that only AFCA can receive complaints after 1 November 2018.

Example text for members of the Financial Ombudsman Service:

If you are not satisfied with our response, you may lodge a complaint:

• with the Financial Ombudsman Service Australia if lodged before 1 November 2018:

Online: www.fos.org.au
Email: info@fos.org.au
Phone: 1800 367 287
Mail: Financial Ombudsman Service Limited
GPO Box 3
Melbourne VIC 3001; or

• with the Australian Financial Complaints Authority if lodged on or after 1 November 2018:

Online: www.afc.org.au
Email: info@afc.org.au
Phone: 1800 931 678
Mail: Australian Financial Complaints Authority
GPO Box 3
Melbourne VIC 3001

Download RG165 May 2018


COSL Systemic Issues Update Q3 2017-2018

Thursday, June 28, 2018 - Posted by Michael McCulloch

The Credit and Investments Ombudsman (COSL) has recently their quarterly systemic issues update for Q3 2017/2018.

A summary of each recommendation and review is provided below and is courtesy of FSP News:

Review | 16 September 2017
Case Summary

We find that:

  • The consumer’s claim the financial services provider (FSP) was not the legal owner of the debt when the default notices were issued has not been made out.
  • The FSP was merely exercising its own commercial decision when it decided not to release the full funds from an earlier sale of one of the security properties in 2015.
  • The consumer’s claim that he is in front with his payments has not been made out.
  • The FSP is not required to provide hardship assistance, such as a moratorium on payments.
This Review was subsequently referred to the Ombudsman for a Determination.

Download Review 16 September 2017

Recommendation | 13 November 2017
Case Summary

  • The consumer leased a laptop from the FSP.
  • The consumer claimed that the FSP’s documentation is misleading and deceptive.
  • The consumer claimed that the FSP inappropriately sent her correspondence.
  • We found that the consumer’s claim that FSP’s documentation is misleading or deceptive was not established.
  • We found that the FSP’s offer to refund the administration fee of $110 to the consumer reasonably compensated the consumer for any loss that she may have suffered as a result of the FSP’s error and recommended that the consumer accept the FSP’s offer to refund the administration fee.
  • After issuing the Recommendation, CIO had further discussions with the parties and negotiated a resolution to the complaint better than that which was recommended.
  • The FSP agreed to refund the consumer all monies paid above the invoice price of the original broken laptop, being the amount of $1,086.18, replaced the broken laptop with a brand new latest model laptop and transferred ownership of the new laptop to the consumer.

Recommendation | 13 November 2017
Case Summary

The FSP provided credit assistance to the consumer to enter into a mortgage.

  • The consumer fell into default with its commercial car loan repayments and the FSP repossessed the vehicle.
  • The consumer claimed that the vehicle was illegally repossessed and that they were prevented from collecting personal goods from the vehicle.
  • The consumer also claimed that items were stolen from the vehicle after it was repossessed.
  • The consumer claimed that the enforcement costs charged were excessive.
  • We found that the FSP was entitled to repossess the vehicle and did so in accordance with the terms and conditions of the loan contract.
  • We found that the FSP did not prevent the consumer from collecting his personal belongings from the vehicle.
  • We are not the appropriate forum to consider the claim relating to items allegedly stolen from the vehicle.
  • We found that the FSP was entitled to pass on enforcement costs it incurred in relation to the consumer’s loan. 
  • We found that the enforcement costs charged by the FSP were incorrectly applied to the loan account, as the FSP should not have charged the consumer for the reduced input tax credit rebate it was entitled to.

Attorney General Reviews Consumer Credit Reporting and Hardship

Thursday, June 28, 2018 - Posted by Michael McCulloch

The Attorney Generals Department has recently released a discussion paper regarding the relationship between consumer credit reporting and hardship.

The purpose of the paper is to examine whether hardship is currently treated adequately under the credit reporting provisions in Part IIIA of the Privacy Act, whether there are opportunities for reform and if so what reforms are appropriate.

The Attorney Generals Department did stress that the paper is not a general review of repayment history information in the consumer credit reporting system.

Source: Attorney General's Department - April 2018


Issue 100 Debt Collection News

Thursday, June 28, 2018 - Posted by Michael McCulloch

Our Debt Collection News blog and newsletter started back in July 2009 with our first article REVS - Putting Them on and Keeping Them Current.

Since then we've covered a whole range of things from street lights being repossessed, providing support to our local communities by being a supportive employer of the NSWRFS, sharing community awareness articles such as suicide awareness, donating to appeals such as Give Me 5 For Kids and  more recently keeping you up-to-date about changes to the EDR Scheme.

Here's some pretty impressive numbers we've collated over the last 9 years:

  • 757,000 people have visited our website since July 2009.
  • On average we attract 7,600 visitors to our site each year. 
  • We have provided in excess of 60 resources that can be downloaded from our website for free.
  • We average 1,754 views of our blog per month.
  • Over 42,000 unique visitors have read an article on our blog at some time in the last 9 years. 
  • Over 500 articles have now been published and can be searched on our website.
  • Our article Australian Electoral Searches Cannot Be Used for Debt Collection has been viewed more than 12,000 times.
  • We have answered approximately 3,200 website enquiries.
  • 340 active subscribers open and read our newsletter each month.

We have also for some time now been publishing our blog across social media including Facebook, LinkedIn and Google and have always encouraged our articles to be shared, not only within your team, but also others in your industry.

Over the coming months our website, blog and newsletter will be getting an update which we hope will make our site more user friendly, easier to navigate and compatible across mobile and tablet devices. Please continue to provide us feedback about the news and tips you would like to read by dropping us an email.

ASIC Warns Consumer About Credit Repair Services

Thursday, June 28, 2018 - Posted by Michael McCulloch

Throughout the month of June 2018 the Australian Securities and Investments Commission (ASIC) ran a public campaign designed to inform consumers of the high level of fees charged by credit repair and debt management firms.

The campaign aimed to highlight the alternative approaches available to consumers rather than paying high fees for a service that they may not receive. These available options include approaching the Creditor concerned about an adverse listing on a credit report, utilising a service such as financial counselling or contacting the relevant external dispute resolution centre if the original complaint cannot be resolved after going through internal dispute resolution.

This is a follow-up campaign to the 2016 ASIC report which found that credit repair and debt management firms:

  • were offering a service where fees and costs were not well explained;
  • often required payment be made before services were provided; and
  • sometimes used high-pressure sales techniques.

You may recall that ASIC has previously pursued enforcement proceedings against one credit repair company in Queensland which we covered in our July 2017 edition.

Peter, Kell, ASIC Deputy Chair, reminded consumers that they are entitled to one free copy of their credit report each year from a credit reporting agency.


FOS Admits Error In Final Determination

Thursday, June 28, 2018 - Posted by Michael McCulloch

The Financial Services Royal Commission has recently heard evidence from a widow that the Financial Ombudsman Service (FOS) made a Determination that she should pay her deceased husband's business loans worth $226,000 over a period of 12 to 18 months.

The evidence was highlighted after the widow, Jennifer Low, was pursued by Suncorp for the repayment of business loans that were provided to her and her late husband after a workplace accident claimed Mr Low's life in 2016. It is understood that Ms Low approached the Consumer Action Law Centre for assistance when Ms Low proposed to pay off the outstanding debt over the loans original 17 year term with monthly repayments of $1,111 which was higher than the contractual repayment however FOS declined her proposal.

FOS found that it would be reasonable for Ms Low to repay the loan, interest free, within 12 to 18 months or a maximum of 5 years. During the hearing, Phillip Field, Lead Ombudsman for Banking and Finance was forced to explain his decision where he claimed that he did not want Ms Low to be still paying the debt in her 80's. Mr Field told the royal commission, "What I had in mind was that situation where you had somebody who was in their 60s paying it until they’re 80. And certainly, from my perspective, if a bank were to lend to somebody in that scenario, I would regard that as not reasonable." He went on to say in the witness box, "In hindsight, I don’t think that was the correct thing to do. I think I should have accepted that the [Consumer Action Law Centre] position was correct and then got on the phone to the bank then and there to try and resolve the matter. I should have said that… once the arrears were cleared on — and at the time of that call it was, but provided the arrears — any arrears on the interest-free loan were also cleared, then if she could make those payments, she was entitled to do so and it would be interest-free until it was paid off."

While the Low Family has not yet accepted Suncorp's offer to extend the repayment period to 5 years instead of 12-18 months, Mr Field said that he expects the bank to change their position and allow Ms Low to make monthly principal-only repayments for the duration of the loan as per her original proposal.

Source: mortgagebusiness - May 2018


Cash Converters Fined $650K For Breaching Guidelines

Thursday, June 28, 2018 - Posted by Michael McCulloch

Cash Converters has again found itself in the spotlight for all the wrong reasons with ASIC finding that the company failed to meet regulatory guidelines and breaching the ASIC and ACCC Debt Collection Guidelines.

An ASIC investigation found that the pay day lender routinely breached the frequency of contact guidelines of 3 times per week or less than 10 times a month -

5. Frequency of Contact
(c) Unnecessary or unduly frequent contacts may amount to undue harassment of a debtor. We recommend that you do not contact a debtor more than three times per week, or 10 times per month at most (when contact is actually made, as distinct from attempted contact) and only when it is necessary to do so. This recommendation does not apply to face-to-face contact which is specifically addressed below. 

The investigation also uncovered that a related company, Safrock Finance Corporation (QLD), was also found to have provided incorrect information to a credit reporting agency. The error resulted in 38,500 customer being reported  inaccurate amount owing over a 1 month period. According to ASIC the financier has since worked with Equifax to ensure all incorrect credit listings have been removed.

ASIC has since imposed licence conditions on Cash Converters which includes outsourcing all of their debt recovery to a 3rd party collection agency and must seek consent from ASIC prior to bringing these activities back in-house.

In retribution this time around, Cash Converters has paid $650,000 in community benefits payments to the National Debt Helpline for breaching the Guidelines.

Peter Kell, ASIC Deputy chair, said in a statement to the media, "Consumers expect to be treated fairly and in a manner that complies with consumer protection laws. ASIC expects all financial service providers to have appropriate systems and controls in place to ensure that debt collection practices are consistent with the guidelines. It is also critical that licensees ensure that credit information provided to credit bureaus is accurate."

This is not the first time that Cash Converters has been investigated by ASIC. You may recall that in our May 2017 blog post that Cash Converters were fined and paid $1.35 million in penalties for breaching responsible lending conduct provisions and refunded consumers $10.8 million in fees through a consumer remediation program.

You can download a copy of the ASIC and ACCC Debt Collection Guidelines from their website.

Source: TheAdvisor - May 2018


FOS Release AFCA Key Dates

Thursday, June 28, 2018 - Posted by Michael McCulloch

This month the Financial Ombudsman Service (FOS) has released an information sheet that outlines how the new External Dispute Resolution (EDR) scheme will be implemented over the coming months.

If you recall from our previous article, the Australian Financial Complaints Authority (AFCA) will operate from Thursday, 1 November 2018 and will replace FOS, CIO and the SCT so consumers have access to only 1 scheme for future disputes. The latest release from FOS provides more details regarding the transition including an announcement of the new AFCA Board and key dates to remember.

You can read the release on the FOS website.


Debt Management Firm Fined Over Misleading Ads

Thursday, June 28, 2018 - Posted by Michael McCulloch

Fox Symes and Associates have recently been fined $37,800 in penalties for making potentially misleading statements in their advertising.

Following an investigation by the Australian Securities and Investments Commission (ASIC) they found that the debt management firm undertook a number of potentially misleading representations on their website, banner advertisements and Google ads. These representations included "Free Debt Assistance", "reduce Debt in Minutes" and "15sec Approval".

The concern of ASIC in this instance was that the statements being made misrepresented the speed and cost of Fox Symes and issued the company with 3 infringement notices. In a statement to the media ASIC Deputy Chair, Peter Kell, said, "Debt management firms are often engaging with particularly vulnerable consumers who are seeking assistance with their debts. They should be careful not to misrepresent their services using high impact terms like ‘free’, ‘minutes’ and ‘seconds’ suggesting that debt assistance will be quick and at no cost".

Fox Symes have since voluntarily amended it advertising once ASIC highlighted the issues. ASIC have indicated that payment of an infringement notice is not an admission of contravention, but rather, they can issue an infringement notice where they have reasonable grounds to believe a person or corporation may have contravened consumer protection laws.

Source: AustralianBroker - May 2018



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