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.
Do you know when your interest on the Personal Property Securities Register (PPSR) is due to expire?
It can be one of the more challenging things that we come across in the debt collection industry. A customer has relocated several times over a number of years however the debt is believed to be secured by an asset which, if repossessed, may finalise the debt or may entice the debtor to enter into a repayment arrangement which is maintained. Upon conducting a search of the PPSR it's then found that the security interest has lapsed. You now have essentially an unsecured debt with very little or no bargaining power.
While many organations used to employ a specialists securities agents this role has gradually been phased out and is now considered a day-to-day role of administration staff who may or may not keep an accurate register and may not know or realise the implications of the interest lapsing especially where a debt has been written-off. If this sounds familiar did you know that if you have a PPSR login that you can generate a report called Registrations Due to Expire?
The report includes information such as:
In our April 2018 edition of Debt Collection News we reported that the ABA announced a new Banking Code of Practice which was subject to approval by ASIC.
ASIC has now signed off on the new Banking Code of Practice following an independent review and extensive consultation with the ABA.
The new Code provides for increased protections for small business borrowers and expands the reach and impact of legal protections against unfair contract terms. Expanded protections for consumers included:
The Code will commence operation from July 2019.
Source: Money | Management - July 2018
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.
The Australian Banking Association ("ABA") has recently announced the retail banks wishing to become members will now be required to sign up for the new Banking Code of Practice ("The Code").
The Code, which is currently awaiting approval by ASIC will be binding, enforceable by law and will be monitored by an independent body. The Code, which was originally introduced in 1993, requires retail banks to provide plain English contracts, stop unsolicited offers to raise credit limits, give customers the ability to end credit cards online and inform customers about service fees before they are incurred.
Regulating the Code will be the responsibility of the Banking Code of Compliance Committee ("BCCC") which will have the power to investigate breaches and apply sanctions. The move comes as the financial services industry tries to regain customer trust with the Financial Services Institute of Australasia ("FINSIA") calling for an industry-wide code to restore professionalism among its members as a way of winning back customer trust.
The ABA is looking to implement The Code within 12 months of approval being received from ASIC.
Source: Financial Standard - March 2018
In our March 2017 edition we released a blog article Bank Lenders Must Meet Unfair Contract Laws.
The Australian Securities & Investments Commission ("ASIC") have now reported by media release on Thursday, 24 August 2017 that National Australia Bank, Commonwealth Bank of Australia, Australian and New Zealand Banking Group (ANZ) and Westpac Banking Corporation have now agreed to specific changes to eliminate unfair terms from their Contracts.
The changes mean that:
Every month the Reserve Bank of Australia ("RBA") releases a range of statistics for transactions incurred 2 months prior across a range of products.
These payment statistics offer an insight across several products including Credit and Charge Cards, ATM Cash Withdrawals, Debit Card Statistics, Cheque and Direct Entry Payments, etc
This month we've focused our attention on Credit and Charge Card statistics for the month of April 2017. The key points coming out of these statistics were as follows:
The number of credit and charge card accounts held by Australians
The number of credit and charge card purchase transactions
The value of credit and charge card purchase transactions
The total value of credit and charge card repayments
The total value of credit and charge card balances accruing interest
The value of credit and charge card total balances
The value of credit and charge card credit limits
The graph below shows a direct comparison to the same period last year:
While there were increases across all credit and charge card statistics overall all increases were less than 1%
The RBA indicated that approximately 2 million Australians fail to pay off their credit card balance in full each month. With the average credit card limit of $4,500 it would take 31 years in which to finalise the balance making minimum repayments only.
Household debt in Australia has steadily risen in the last 30 years as more Australians aim to own their own homes and continue to rely on credit such as personal loans and credit cards.
According to data released by the Organisation for Economic Co-Operation and Development ("OECD") household debt to income in Australia has more than doubled between 1995 and 2015 going from 104% to 212%. Based on the average Australian wage of $78,832 this means that Australians are now spending $167,000 per year.
Internationally, since the 2008 global financial crisis, many developed countries actually saw deceases in household debt however Australian debt levels continued to increase with Australia placing 4th overall in household debt behind Denmark, the Netherlands and Norway.
With total personal debt now approximately $2 trillion this debt can be broken down into several categories:
The Australian Bureau of Statistics shows that mortgages make up 56.3% of personal debt in Australia.
This is debt associated with investments such as rental properties or shares and makes up 36.5% of household debt.
Personal loans currently make up 3.1% of Australian household debt and generally relate to motor vehicle purchases, debt consolidation, household goods purchases and holidays.
Student debt, particularly from HELP Loans make up 2.1% of Australian household debt. The National Centre for Social and Economic Modelling ("NATSEM") did note however that this figure reflects the time it takes in which for student debt to be paid.
Credit Card Debt
While historically reports have indicated that credit card debt is out of control in Australia, credit card debt currently represents only 1.9% of total household debt.
While the data released by OECD paints a dire national and global picture it should be noted that these figures don't necessarily impact us on an individual level as some households will generally have higher levels of debt and debt stress whereas others will have less.
It should also be noted that while our own personal debt may be among the highest when compared to GDP the majority of this debt, 92.8%, is from home loans and investments meaning that this debt is effectively a way in which to potentially build future wealth.
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Raj Venga, CEO of the Credit and Investments Ombudsman ("CIO") has expressed concern about a proposal by the Federal Government to establish a tribunal to hear complaints about financial service providers.
In a Statement Mr Venga said, "Australia is currently very well served by the existing dispute resolution architecture in financial services. The types of disputes referred to in the current debate about the need for a new body generally involve amounts that exceed the monetary limits of CIO and the Financial Ombudsman Service (FOS), and so have not been able to be considered by either scheme".
Mr Venga pointed out that any such tribunal would:
• Create a tax-payer funded right of appeal to the courts, defeating the objective to resolve disputes fairly, cheaply and expeditiously,
• Not have the multiplicity of access points for industry and consumer representation that the current structure affords,
• Not have specialised industry knowledge required for the sensible resolution of disputes,
• Be substantially more inflexible, and
• Not be capable of responding quickly to changes in relevant markets.
Time will only tell at this stage if this is the beginning of the end for External Dispute Resolution ("EDR") however we will continue to monitor the progress of any such move to abolish the EDR process.
Source: CIO Media Release August 2016