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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
We have had some situations of late where Garnishee Orders for Wages or Salary are being filed however the employer has been unable to comply with the Order as the Judgment Debtor is not earning over the Weekly Compensation amount.
This leads to a situation where deductions are not being made which means that deductions are not being made to reduce your debt.
s122 of the Civil Procedure Act states:
1. The amounts attached under one or more garnishee orders must not, in total, reduce the net weekly amount of any wage or salary received by the Judgment Debtor from the Garnishee to less than $447.70 as adjusted under Division 6 of Part 3 of the Workers Compensation Act 1987 .
1 (a). The amount of $447.70 referred to in subsection (1) is an
"adjustable amount" for the purposes of Division 6 of Part 3 of the Workers Compensation Act 1987 .
2. In this section:
"net weekly amount" , in relation to any wage or salary payable to a Judgment Debtor, means the amount payable each week to the Judgment Debtor after deducting any taxes or other sums that, pursuant to any Act (including any Commonwealth Act), are required to be deducted from any such money.
Effectively this means that the Judgment Debtor can retain an amount of $480.50 (effective from 01/04/2016).
Several options remain to you if the Judgment Debtor is not earning over the Weekly Compensation amount however for the purpose of this article we will only discuss 2 possible solutions.
The most obvious solution is to have the Judgment Debtor apply for an Instalment Order at the Local Court. This offer for payment by the Judgment Debtor removes the protections that they have under s122 of the Act and deductions must be made for the amount that the Instalment Order is made for.
Alternatively you may consider, if you have details of the financial institution that the Judgment Debtor banks with, the issue of a Garnishee Order for Debts. This Order attaches to any / all monies held in the Judgment Debtors bank account with that particular financial institution and is not subject to s122 of the Act.
If you need more information about enforcement of a Garnishee Order please contact us.
Got a suggestion or an improvement? Let us know here.
The past 2 months we've received a number of questions about retaining Centrelink payments to pay a debt.
The Centrelink code of operation position is clear that the default position is the most that may be retained is 10%, and this ONLY applies to debts that are overdrawn savings accounts.
You can read the full code here.
A copy of the purpose of the code is pasted below for your benefit (current as at September 2015)
All parties recognise that the Australian Government provides payments to customers to ensure they are able to provide basic food and accommodation for themselves and their families. The aim of this Code is to ensure that recipients of income support payments and DVA payments have sufficient income to maintain adequate food and shelter. Participating ADIs agree that they will take this into account when considering the amount they should recover each fortnight for the repayment of the debt.
All parties also recognise that not all customers:
Under this Code, the default position is that a customer should be able to retain at least 90 per cent of their income support payment or DVA payments in any fortnightly period. However, nothing in this Code prevents either:
For clarity, where the ADI is unable to contact the customer about the debt, the maximum repayment amount that may be deducted from the customer’s fortnightly payment will be the amount equal to 10 per cent of that fortnightly payment.
A customer is able to request that their ADI reviews the repayment amounts should the customer's circumstances change.
Source: Centrelink Code of Operation
We often come across examples where requests are made to our office for the issue of Default Notices. Having reviewed the request we then find that the same debtors have been issued with the same Notices several times over the course of their loan.
Effectively as a Creditor you are teaching the debtor to pay upon receipt of the Default Notice and not as their Contract stipulates. The debtor will often make contact, make arrangements to clear the arrears however fall into arrears again. The next month you will be issuing another Default Notice, the debtor will contact and make an arrangement and the cycle continues. As a Creditor how can you end this cycle and take control of the account?
Under Section 94 of the National Consumer Credit Protection Act 2009 the debtor can propose an application, verbally or in writing, to postpone action under a Section 88 or Section 90 (i.e. they make an arrangement to clear the arrears). The application must be made by the debtor prior to the s88 or s90 Notice expiring.
As the Creditor you must respond to the request made by the debtor within 21 days of the application and advise of the decision, either accepting or declining the application, the name of their relevant EDR scheme and the debtors rights under the scheme.
What happens though if you wish to accept the debtors proposal but don't want to get caught in the cycle of issuing another Default Notice?
As a Creditor you can issue a Section 95 Notice of Postponement under the Act.
This Notice indicates to the debtor the conditions of the postponement and advises the debtor that the Creditor is not required to give any further Default Notice under the NCCP Act. The Notice however only applies to the debtor that originally negotiated the postponement and does not apply to other debtors, mortgagors or guarantors under the Contract unless these parties have consented to the negotiated postponement.
You can find out more about this service by contacting us.
MoneyHelp in Victoria, a free financial counselling service, has recently come out in the media claiming that they are fielding 100 phone calls a week for people in financial hardship with credit card debt.
In the past 3 months, on average, more than 50% of callers advised of $10,000 of unsecured credit card debt and 1 in 10 callers disclosed unsecured credit card debt of more than $50,000.
It was noted that on average at least 1 person a week was reported as trying to sustain $100,00 of debt while also managing at least 5 credit cards.
Recently the Consumer Action Law Centre has been pushing for more responsible lending and easier ways for consumers to cancel and switch credit cards as well as direct debits which, historically, consumers have found difficult to cancel despite requesting that the service provider do so.
While most continuing credit facilities had relatively small balances it was found that consumers are often enticed to increase their limits or transfer balances between cards following the advertisement of interest free periods and low introductory interest rates. While this may provide the consumer some relief in the short term, in the long term they often end up paying more as introductory rates revert to a higher interest rate and other fees and charges continue to accumulate on new purchases.
The Australian Bankers' Association said that there were strong measures in place to protect consumers including responsible lending laws and encourage those in debt to contact their Creditors to seek hardship assistance when required.
Source: The Herald Sun
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: