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Debt Collection News


Released every month our debt collection blog contains news, stories and tips to keep you informed.

Using the Legal System to collect debts in New South Wales

Friday, April 01, 2011 - Posted by Philip Harvey

This is the second article in a series where we will go through using the Legal System to Collect Debts in all States and Territories. Previously we have compared specific legal actions between states and territories. 

Included in this is a workflow to assist in the understanding of the process. The workflow is located after the article. You may also like to download a copy of this workflow for you own records. A link for the download is at the end of this article.

Statement of Liquidated Claim 

After expiry of default notice the initiating action in the Local Court is a Statement of Liquidated Claim (also referred to as a SLC).

  • Can be served via post or in person

  • Can apply for Judgment 28 days after service

*Costs between $434.60 to $1,029.00  depending on amount

This can be compared against the other states and territories here.

 

Judgment

  • This action formally registers the debt with the court and allows further collection action.
  • Judgment stands for 12 years.
*Obtaining Judgment costs between $105.20 to $263.00 depending on amount of claim (undefended)


This can be compared against the other states and territories 
here.


Once Judgment granted then 4 choices of enforcement proceeding are possible.


Oral Examination

  • This is used where you are unaware of Debtors Assets, Employment.

  • Examination Notice must be issued first and not returned for 28 days prior to applying for an Oral Examination.

  • Documents are personally served on the debtor to attend court.

  • Hearing is conducted by the Registrar and debtor must provide details of income expenses and assets.

  • If debtor doesn’t attend then you can apply for an arrest warrant.

This can be compared against the other states and territories here.

*Cost is $482 for the Court Application + preparation and attendance charges (unable to quantify)  (undefended).


Garnishee Order.

  • Two types - Garnishee Order for Debts or Garnishee for Salary / Wages

  • Must know the financial institution details or employers details

  • documents are served on the financial institution or employer

  • Garnishee for Debts - Financial institution advises of amount garnished (if any). There are protected monies (Centrelink Benefits) that you may not received. This is a one off payment unlike a Garnishee for Salary / Wages

  • Garnishee for Salary / Wages - Employer remits all amounts over the Weekly Workers Compensation Amount ($409.10 as at January 2011) within 14 days and for as long as debtor remains employed / debt satisfied.

  • Garnishee for Salary / Wages - Debtor can attend their nearest local court and lodge a Garnishee Instalment order to reduce the amount paid. Needs to justify this to the registrar with supporting income, expenses, assets & liabilities.

*Cost can vary from company to company. LCollect charge under $100.

This can be compared against the other states and territories here.

Writ

  • Sheriff attends property of debtor to demand payment and tag any assets of value.
  • If payment cannot be made goods to the value of the debt are seized and sold.

  • Debtor can lodge an instalment order to stay the action

*Cost is $305.00 depending on amount of Claim (undefended)

This can be compared against the other states and territories here
 

Bankruptcy

  • Judgment must be obtained then a bankruptcy notice served.

  • Once Bankruptcy notice has expired then Bankruptcy can be applied.

  • Once bankruptcy obtained all debts owed by the debtor are captured under the Bankruptcy.

*Cost is a minimum of $2500.00 if matter is undefended (after Judgment costs)

 

* Important Note: All costs are estimates as at 20/04/2011 and do not include costs of counsel and preparation for hearing.


Lessons to Learn from the NSW State Governments Debt Collection

Friday, April 01, 2011 - Posted by Philip Harvey

The new NSW government revealed that the state was owed over $1 Billion in unpaid fines. State Finance Minister Greg Pearce was highly critical of the Office of State Revenue for failing to enforce the payment of penalties.

The State Debt Recovery office details the enforcement process on their website which can be found here.

What Collections lessons can we all take from this?

Looking at the recovery process we believe the State Debt Recovery Office (SDRO) processes are falling over once RTA restrictions have been imposed. Should you note pay your parking fine / infringement notice, upon expiration of an Enforcement Order, the SDRO will suspend your license, cancel your registration and impose customer restrictions on your account. Most people pay their fines before this point. Those that do not drive on our roads unlicensed and unregistered (an insurance liability nightmare itself).

The Other sanctions after the RTA restrictions have been imposed allow for a Property Seizure Order, Garnishee Order, Examination Summons and Charge on Land.

If a debtor has the capacity to pay, these Other Sanctions will gain payment if used effectively. It is our opinion that this is where SDRO is falling over. The reasons for this could be;
- insufficient staff to pursue these avenues
- lack of knowledge on how to use these collection tools
- not prepared to spend any money to use these collection tools.

There are many ways to correct these reasons including training, employing more staff or outsourcing.

In this SDRO instance, the minister has indicated they will look at outsourcing this to specialist debt collection agencies.

Key Points for your organisation;
- examine your arrears portfolio
- identify non-paying sections of your portfolio
- look at available enforcement options
- review the resources available to your organisation to effectively enforce your debts.

Lessons to Learn from the NSW State Governments Debt Collection

Friday, April 01, 2011 - Posted by Philip Harvey

The new NSW Government revealed that the state was owed over $1 Billion in unpaid fines. State Finance Minister Greg Pearce was highly critical of the Office of State Revenue for failing to enforce the payment of penalties.

The State Debt Recovery office details the enforcement process on their website which can be found here.

What debt collection lessons can we all take from this?

Looking at the recovery process we believe the State Debt Recovery Office (SDRO) processes are falling over once RTA restrictions have been imposed. Should you note pay your parking fine / infringement notice, upon expiration of an Enforcement Order, the SDRO will suspend your license, cancel your registration and impose customer restrictions on your account. Most people pay their fines before this point. Those that do not drive on our roads unlicensed and unregistered (an insurance liability nightmare itself).

The Other sanctions after the RTA restrictions have been imposed allow for a Property Seizure Order, Garnishee Order, Examination Summons and Charge on Land.

If a debtor has the capacity to pay, these Other Sanctions will gain payment if used effectively. It is our opinion that this is where SDRO is falling over. The reasons for this could be:
  • Insufficient staff to pursue these avenues
  • Lack of knowledge on how to use these collection tools
  • Not prepared to spend any money to use these collection tools.

There are many ways to correct these reasons including training, employing more staff or outsourcing.

In this SDRO instance, the minister has indicated they will look at outsourcing this to specialist debt collection agencies.

Key Points for your organisation:
  • Examine your arrears portfolio
  • Identify non-paying sections of your portfolio
  • Look at available enforcement options
  • Review the resources available to your organisation to effectively enforce your debts.

Western Sydney Based Credit Union Testimonial

Monday, March 28, 2011 - Posted by Michael McCulloch

[Credit Unions & Mutuals]

Advice and service is always professional yet friendly.

Collections Manager

Inner West Sydney Based Credit Union Testimonial

Friday, March 25, 2011 - Posted by Michael McCulloch

[Credit Unions & Mutuals]

I am happy with the "all round debt collection" service that LCollect provides.

Collections Manager


Trustees Re-Directing Payments

Tuesday, February 01, 2011 - Posted by Philip Harvey

We have had a couple of instances over the past 3 months where debtors have redirected there payments to the proposed registered Trustee at the direction of the proposed registered Trustee & advising us they are making a Part IX application. It is an important point that a Trustee who is registered with ITSA does not become the Trustee of a debtor until an Act of Bankruptcy has been submitted.

When our team performed searches for the bankruptcy, there is was record.

This raised alarm bells within our Collections team & further investigation was required. Reviewing the time line of the debts & after speaking with the proposed registered Trustees we learnt the following;

    • Payments had been redirected for over 3 months. In one instance the payments to the Trustee were going to total $1,500 by the time the payment plan was going to be completed.

    • The Trustee had had no intention of filing the Part IX Agreement in the immediate future (this is a contentious point that a Trustee would argue). These payments were not going to be distributed to creditors.

    • In one instance when we reviewed the debtors assets & liabilities it was startlingly obvious to us that a Part IX agreement would never be accepted with the debtor having "negative" capacity to live, before taking into consideration outstanding debts.

    • In another instance, our client was the only creditor and we would reject any Part IX Agreement on their behalf as we would happily accept the same arrangement without the Trustee charging there $1,500 (and avoid unnecessarily reducing the payments received by our client)

    Note that we are still able to pursue the debtor for payments as no Bankruptcy had been lodged, yet the debtor was following the registered (proposed) Trustees direction. When advising the debtors of our right to still pursue this debt through the courts, the debtors advise that the Trustee advised them this will be "fixed up" once the Bankruptcy is lodged.

    Our immediate question was what was the debtor actually paying the Trustee for??

    The answer is a "preparation" fee for preparing a Bankruptcy (in this instance a Part IX). The Bankruptcy Act allows for charges for preparing Bankruptcies - however the preparation of a Part IX debt agreement is a simple & straight forward process (we believe the Act was allowing this for complex schemes of Arrangement that are complex & involved).

    We formed the view that this was the Trustee acting very unscrupulously, using the Bankruptcy Act for something that was unintended. The Bankruptcy Act affords little or no protection from Trustees acting in this manner for debtors who do not know how the system works.

    We subsequently phoned ITSA to see if we could register a complaint (in the example where our client was the only creditor), and were advised that only the Debtor could make a formal complaint. In the telephone conversation ASIC agreed & were sympathetic with the points we raised, yet there was nothing they could do. They made the comment that with all the advertising for Part IX debt agreements this was becoming more common.

    Perhaps we will see some reform in this area in the coming years......


  • The Financial Ombudsman & Judgment Accounts

    Tuesday, February 01, 2011 - Posted by Philip Harvey

    Last week we looked in detail at the jurisdiction that FOS has on Judgment accounts

    We recently had conversations with ASIC about this. ASIC's opinion was that there are circumstances that FOS will review an account that has Judgment, despite the terms of reference outlined in last months article.

    We spoke with FOS to get their view on this to try and get a definitive answer.
    The broad outline of there response was to seek out the cause of the dispute, breaking it into 2 categories;
    1. Negotiations on Accounts without using a legal instrument on a Judgment account
    2. The use of a post Judgment legal action causing the dispute.

    Dealing with negotiations on accounts without using a legal instrument, the implication was that if you were negotiating a payment arrangement with the debtor & these negotiations were not the result of a legal action undertaken (Writ, Garnishee etc) then it is within their jurisdiction.

    However if a debtor was raising a matter with FOS because of a legal action undertaken such as a Garnishee against wages, then it would not be within their jurisdiction.

    So what to do in the future on these accounts??
    We would suggest using post judgment legal action to enforce your debts (Garnishees, Exams, Writs etc). Where a debtor phones you wanting to enter into a payment arrangement, have them attend the court and file an instalment order (though this may raise a dispute where debtors complain to FOS that you will not negotiate, and opens up another can of worms).

    We add that we have not received this in writing from either FOS or ASIC. We will endeavour to keep you updated as we encounter more information / examples.

    Western NSW Based Credit Union Testimonial

    Monday, January 24, 2011 - Posted by Philip Harvey

    [Credit Unions & Mutuals]

    Staff at LCollect have always been helpful and supportive especially when new staff are learning.

    Julie - Collections Manager


    eFiling in the Supreme Court for Possession of Land

    Saturday, January 01, 2011 - Posted by Philip Harvey

    LCollect is the first organisation to file a Statement of Claim for Land through the NSW Attorney Generals Dept new JusticeLink system. 

    Under the manual paper lodgment system previously used, it would typically take between 4-8 weeks to receive a Statement of Claim back from the Supreme Court. Under the new JusticeLink system, we know receive a Court stamped & bar-coded SLC for Land within 15 minutes of lodging it online. This significant improvement in speed can help reduce losses on loans where shortfalls exist & provides a superior service with the best technology to our Clients.

    We are pleased to be able to provide this to all our clients as a value added service.

    The process will be further improved when applying for Judgment, and we anticipate this will save a further 6-8 weeks. We will advise of this once we have successfully completed a Judgment application through the JusticeLink system.

    If you are not using LCollect for your mortgage repossessions but would like to use an organisation that uses Justice e-filing service & the benefits associated with it, please call us now.

    The Financial Ombudsman & Judgment

    Saturday, January 01, 2011 - Posted by Philip Harvey

    Have you received notification from FOS where you already have obtained Judgment against the debtor? What are the Terms of Reference that FOS operates under in these circumstances? 

    Section 5.1 in the FOS Terms of Reference deals  with Disputes outside the scope of FOS & Exlusions from FOS's jurisdiction. Section 5.1 L states;
    The service may not consider a dispute that has already been dealt with by a court or dispute resolution tribunal established by legislation, or by another external dispute resolution scheme approved by ASIC.

    By having Judgment already against a debtor means that the matter has been dealt with by a court & satisfies this criteria.

    We have been advised by a number of our clients of instances where FOS want to hear a matter meeting the above criteria. The first thing you should do is advise FOS of your Judgment & send them a copy of your judgment & SLC. The Financial Ombudsman Circular Newsletter from Augus 2010 deals with this in detail and advises;

    "If the FSP considers the Dispute to be outside FOS’s jurisdiction, it should make a written submission to FOS within 14 days of the referral of the Dispute. FOS will consider this submission promptly and if a decision is made to exclude a Dispute, then the process for excluding Disputes contained in paragraph 5.3 of the TOR will apply. This includes providing an Applicant with 30 days to object to an assessment about our jurisdiction to consider the Dispute during which time our file will remain open. 

    Where an FSP has obtained judgment against an Applicant for repayment of a debt or possession of a security property prior to the date the Dispute is lodged, FOS is unable to consider a dispute about the FSP’s entitlement to recover the debt or the security under paragraph 5.1(l) of the Terms of Reference. 

    FOS will require FSPs to provide copies of legal documents to establish that the FSP has obtained judgment against the Applicant in relation to the debt(s) or property(ies) in dispute. This would include a copy of the Statement of Claim and judgment. 

    Further, if the court documents are not clear about the accounts the legal proceedings related to, we may require an FSP to provide information to show that the legal proceedings actually related to the debt in dispute. 

    Importantly, FOS expects that an FSP will not take any steps to enforce a judgment until after our file is closed. If an FSP takes a step to enforce a judgment while our file is open, we may report this to ASIC as “serious misconduct”. 

    However, parties should be aware that FOS has no power to stop a sheriff from executing an order or judgment. Therefore, lodgement of a dispute will not result in a sheriff being prevented from taking enforcement action. Nor will FOS require an FSP to withdraw an instruction already communicated to a sheriff to enforce a judgment or court order. In these circumstances, the applicant should seek urgent legal advice about any options which may be available to them.

     

    FOS's Process for exclusion of Disputes is dealt with in Section 5.3:
    a) Where a Dispute is lodged with FOS and: 
    (i) FOS considers that these Terms of Reference exclude the Dispute; or 
    (ii) FOS decides to exercise a discretion under these Terms of Reference to exclude the Dispute, 
    FOS will advise the Applicant (and any other parties that are involved in and have been informed about the Dispute) and provide reasons for this assessment.

    In a FOS submission to ASIC, FOS state they are not a court of appeal & they should not consider complaints that have default judgment.

    FOS's full terms of reference can be found here
    FOS's August 2010 Newsletter can be found here
    FOS's submission to ASIC can be found here (relevant submission is on page 5 titled D4)



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