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.
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