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The importance of internal processes and procedures that are correct when a debt is written off before being outsourced for collection cannot be emphasised enough.
In 3 similar examples of consumer credit files, involving 3 different lenders, the security interest was made void on the PPSR (Personal Property Security Register) through their actions. In one of the examples, upon being referred a written off debt for collection we were no longer able to collect the debt at all because of our clients actions.
In the most extreme example of what can go wrong in the collection of a debt, upon receipt of a new debt to collect it was noted that debt was secured by a motor vehicle The PPSR reflected our clients interest correctly. We repossessed the security 6 days later. Having waited for the Notice After Taking Possession of Mortgaged Goods to expire, we sought to sell the vehicle through an auction house. The auction house notified us that our client's interest was not listed on the PPSR.
We were concerned this was some form of error and immediately checked the PPSR and with our client what had happened. The collections manager informed us that they had done nothing to remove the PPSR listing. However, digging a bit further it was discovered that when a file is written off to a zero balance a report is generated for the loans team for zero balance loan accounts. This report then goes to an operator who is responsible for updating and removing listings on the PPSR. The listing is then subsequently removed, as it was in this case. Once a PPSR listing is removed the security is lost.
It got worse. The debtor was under a Part IX Debt Agreement. Our client was not part of the Part IX because of the security interest. In addition to removing the PPSR listing, a paid in full letter was issued to the debtor. The debtor subsequently forwarded this to the Trustee.
Putting this example into monetary values;
Generally, the three examples of our clients removing their PPSR interest have some form of the following processes in place;
We are aware that some of our clients have additional steps in place to prevent this from occurring which include;