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Debt Collection News

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.

Australian Government To Crack Down On Late Paying Large Corporations & Government Departments {Update}

Thursday, November 29, 2018 - Posted by Michael McCulloch

You may recall in our November 2016 edition of Debt Collection news that there were moves within the Government to crack down on late paying large corporations and Government departments. 

It appears that this issue has been raised again with the Small Business Ombudsman, Kate Carnell, telling Fairfax Media that she was again conducting a review of payment times and the impact that this has on cash-flow on small businesses in Australia.

This again follows the Ombudsmans review into payment times last year, which we covered in Australian SMEs Owed More Than $10,000, which identified Australian payment times as the worst in the world with invoices paid, on average, 26.4 days past due. In a statement to the media Ms Carnell said, "It is big businesses using small business as a cheap bank," Ms Carnell said. "It really does slow down the economy. Poor cash flow is the primary reason for insolvency in Australia.”

The recent move by the Ombudsman appears to have been prompted by Small Business Minister, Michaelia Cash, who requested in writing advice from the Ombudsman for advice as to the impact payment practices have on small business. Ms Cash said, "I am still getting reports of payment terms of 60, 90 or 120 days or alternatively loans for extended payment terms. I find that very troubling particularly when cash flow is king for small businesses. It continues to be an issue and we will tackle it."

Following last years inquiry the Business Council of Australia launched a voluntary code to ensure that small businesses were paid within 30 days of an invoice being issued. With, however only 47 of 139 members, subscribing to the Code there is now some consideration being given to passing legislation in which to compel payment to ensure small businesses continue to survive.

A short survey is available online for small businesses to complete about the payment times they encounter. 

Instructing on Archived Debts

Thursday, November 29, 2018 - Posted by Michael McCulloch

Did you know that you can instruct us via our online portal for new, current but also archived debts?

We sometimes see new debts opened online where an existing account already exists. This leads to duplicate files being opened and while this does not cause us any problems we find that by maintaining only 1 file for each account type, whether this be a personal loan, overdraft, overdrawn savings account, that it allows you to find the updated information you need for reporting quickly and easily and provides a full debt history.

This month we've created an instructional video, which you can download, which shows how you can quickly and easily locate your previously closed accounts and instruct us to re-open them. Alternatively if you need any additional assistance please contact us.

If you liked this video and would like to see more please let us know.

Note: Please note that the video is is approximately 60mb in size and in Windows Media Video File format (.wmv). Please make enquiries with your internal IT department prior to downloading to ensure that by downloading this video you are not breaching any of your businesses policies.

Is It Legal to Charge Interest to a Debt?

Thursday, November 29, 2018 - Posted by Michael McCulloch

It's a question that we come across on a regular basis from our commercial clients and one that is more common than you may think.

Interest is the price (charge) paid for the use of someone else's money. For commercial clients, it is a charge that your clients pay when they don't pay that your invoice by the due date. When they don't pay you on the due date, they are effectively borrowing money from your organisation.

While those in the finance industry often have very well worded Contracts and Terms and Conditions that allow the calculation of an annual percentage rate (APR) many small business owners struggle to understand the requirements and while they understand the practical value of incurring interest they worry about the practicalities of applying additional interest fees or charges to an outstanding account.

Can you charge interest to a debt?

The short answer to this question is yes provided your terms and conditions permit it. There are however strict requirements you must meet in order for your claim for interest to be legally collectable, and we would recommend you seek legal advice to ensure your interest charges are recoverable.

What are the requirements?
There should be a provision in your Contract, Agreement and / or Terms and Conditions for the calculation of interest that the customer has agreed to prior to monies being advanced for the goods or services you have provided. This provision should be easy to understand, outline to the customer exactly when interest charges may apply, how they are calculated, the date that interest may start to accrue on the debt and should be a fair and reasonable rate.

What is a fair and reasonable rate?

A fair and reasonable rate can be difficult to determine however most businesses charge between 5% to 10% per annum. The interest charge should be at a rate that is a genuine estimate of the cost of the late payment to your business (ie your banks overdraft rate). Anything higher than this may not be enforceable. 

The Local Court of NSW currently prescribes a pre-Judgment interest rate of 5.50%. This rate is 4.00% above the cash rate last published by the Reserve Bank of Australia and is reviewed every 6 months. The current rates can be found at Interest Rates Applicable After 1 July 2010.

Should you charge interest?

Charging interest to a debt can have pros and cons, and is ultimately a commercial decision. Where a customer knows that interest may be charged on an overdue account or invoice it is often incentive enough for them to pay on time. On the other hand you may alienate a particular customer who may take their business elsewhere. While you may offer a better product or service than your competitor, applying interest to a debt could be the very reason you lose business.

In a situation like this it is often better to communicate to your customer that their payment is late and granting an extension for payment before charging interest and being flexible enough to agree to waive these charges if a customer can be retained.

Is there a minimum amount I can charge interest on?
In NSW the Uniform Civil Procedure Rules 2005 states the following:

36.7 Payment of Interest
(2) The Local Court may not order the payment of interest up to judgment in any proceedings in which the amount claimed is less than $1,000.

While interest may be charged on a debt less than $1,000, assuming that this is clearly set out in your Contract, Agreement and / or Terms and Conditions, it will, if legal proceedings prove necessary, be at the discretion of the Court as to whether or not interest will be awarded.

Have a question about interest, fees or charges? We recommend that you speak with Collection Law Partners or a qualified legal practitioner.

Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relied on in any way.

Limitation Period for Body Corporate Debt Recovery

Thursday, September 27, 2018 - Posted by Michael McCulloch

There has been some anxious times recently for body corporates who have been eagerly awaiting the decision in the Queensland Court of Appeal in Body Corporate for Mount Saint John Industrial Park Community Title Scheme 18632 v Superior Stairs & Joinery Pty Ltd [2018] QCA 173.

In the District Court the Defendant, Superior Stairs & Joinery Pty Ltd (STJ) argued that the action by the Plaintiff, Body Corporate for Mount Saint John Industrial Park Community Title Scheme 18632 (Body Corporate), should be struck out after action was taken for the recovery of unpaid levies, recovery costs and penalty sums on the basis that the proceedings were commenced outside of the limitation period. STJ arguies that the limitation period for bringing body corporate debt recovery action was contained in Section 145 of the Body Corporate and Community Management (Standard Module) Regulation 2008 (QLD) -

Part 4 Payment and Enforcement of Body Corporate Debts
s145 Payment and Recoery of Body Corporate Debts

(1) If a contribution or contribution instalment is not paid by the date for payment, the body corporate may recover each of the following amounts as a debt -
(a):  the amount of the contribution or instalment;
(b) any penalty for not paying the contribution or instalment;
(c) any costs (recovery costs) reasonably incurred by the body corporate in recovering the amount.
(2) If the amount of a contribution or contribution instalment has been outstanding for 2 years, the body corporate must, within 2 months from the end of the 2-year period, start proceedings to recover the amount.

STJ successfully argued in the District Court that the time limit for recovery of a debt by the body corporate was 2 years and 2 months pursuant to s145(2) however the Body Corporate submitted at the time that the time limit was 6 years from the date the levy became due and payable pursuant to Section 10 of the Limitations of Actions Act 1974 (QLD).

 The District Court agreed with STJ at the time however on appeal, the Court of Appeal, overturned the District Courts decision. In the decision Justice McMurdo, Justice Mullins and Justice Bond stated that the issue raised on appeal was not that of conflicting limitation periods but whether or not s145 prescribes a limitation period. The Justices concluded that s145 is to compel a body corporate to commence proceedings but cannot be interpreted as a limitation period and therefore s10 of the Limitiation of Actions Act is the governing legislation (ie 6 years from the date the contribution becomes outstanding).

Victoria Plans Crackdown on Debt Collection Industry

Monday, July 30, 2018 - Posted by Michael McCulloch

The Labor party in Victoria has planned a crackdown on debt collection in Victoria if re-elected at the November State election. and radio 3AW 693 are reporting that organised crime groups will be the focus of a planned State Government crackdown on the debt collection industry with Police Minister, Lisa Neville, announcing earlier this month an overhaul of the regulations. In a statement to the media she said, "We'll clean up this industry, like we did with scrap metal - to tackle organised crime and crack down on rogue operators."

The Labor Government, if re-elected, would like to establish a dedicated commission and harsher penalties for those involved in unlicensed debt debt collection in Victoria and would work more closely with the police, Consumer Affairs Victoria and industry leaders to clean-up the industry.

Chief Executive of the Australian Collectors and Debt Buyers, Alan Harriers, said in response, "If they are that [sic] then it's up to Fair Trading to stop them as being illegal persons doing debt collection. I am unaware of any prosecutions against people in this regard. If they were actual proper debt buyers, they would hold an Australian credit licence that is issued by ASIC. It's a very highly regulated industry."

In Victoria there is not a legal requirement in which to hold a debt collection licence.

Issue 100 Debt Collection News

Thursday, June 28, 2018 - Posted by Michael McCulloch

Our Debt Collection News blog and newsletter started back in July 2009 with our first article REVS - Putting Them on and Keeping Them Current.

Since then we've covered a whole range of things from street lights being repossessed, providing support to our local communities by being a supportive employer of the NSWRFS, sharing community awareness articles such as suicide awareness, donating to appeals such as Give Me 5 For Kids and  more recently keeping you up-to-date about changes to the EDR Scheme.

Here's some pretty impressive numbers we've collated over the last 9 years:

  • 757,000 people have visited our website since July 2009.
  • On average we attract 7,600 visitors to our site each year. 
  • We have provided in excess of 60 resources that can be downloaded from our website for free.
  • We average 1,754 views of our blog per month.
  • Over 42,000 unique visitors have read an article on our blog at some time in the last 9 years. 
  • Over 500 articles have now been published and can be searched on our website.
  • Our article Australian Electoral Searches Cannot Be Used for Debt Collection has been viewed more than 12,000 times.
  • We have answered approximately 3,200 website enquiries.
  • 340 active subscribers open and read our newsletter each month.

We have also for some time now been publishing our blog across social media including Facebook, LinkedIn and Google and have always encouraged our articles to be shared, not only within your team, but also others in your industry.

Over the coming months our website, blog and newsletter will be getting an update which we hope will make our site more user friendly, easier to navigate and compatible across mobile and tablet devices. Please continue to provide us feedback about the news and tips you would like to read by dropping us an email.

Armidale Regional Council to Auction Properties

Wednesday, May 30, 2018 - Posted by Michael McCulloch

In our March 2018 edition we reported that Bundaberg Regional Council were auctioning several properties for outstanding rates. It appears that this trend is set to continue with Armidale Regional Council following in their footsteps.

The Armidale Express is reporting that council is set to auction 59 homes after owners have failed to pay their rates. Council is reporting that the 59 properties, which include vacant parcels of land, are valued at $748,300 which is roughly a quarter of the $2.455 million owing as at the end of June 2017. Outstanding rates vary with amounts owing to council between $2,391 to $75,811.

Chief Executive, Chris Rose, said in a statement to the media, "It is unfortunate council has to take this path. However, if council did not act to recoup the outstanding amounts, it would be unfair on ratepayers who pay their rates in full and on time. Property owners are advised to contact council if they are falling behind in paying rates. We can work out an agreeable payment plan or, in some cases, they can apply for hardship rate relief. Plus, rates can also be paid on a weekly, fortnightly or monthly basis via direct debit, rather than waiting until the quarterly bill."

All NSW councils are bound by the NSW Local Government Act that gives councils the power to sell occupied properties where rates have not been paid in more than 5 years and vacant land where the overdue rates exceed the current land valuation provided by the Valuer General.

The properties are set for auction at Armidale Town Hall on Friday, 14 September.

FSPs Filing Police Reports [Reminder]

Thursday, March 29, 2018 - Posted by Michael McCulloch

We have again received notification from the Credit and Investments Ombudsman ("COSL") that this practice seems to be ongoing. From their March 2018 edition of CIO News we came across this reminder -

We have recently received a number of complaints against consumer lease providers, where the FSPs have reported their customers to the police. They were reported on the basis that the goods associated with the lease, were stolen as these customers had defaulted on payments.

We would like to remind our FSP members that they have enforcement rights under the National Credit Code. We would consider these as more appropriate when enforcing their rights due to non-payment. We note that this is despite a number of states have broad definitions of stealing and fraud under their criminal codes.

A decision to report goods as stolen, rather than pursue standard collections or enforcement action, does not demonstrate good industry practice.

In our November 2016 edition of Debt Collection News we reported about this very issue in Financial Service Providers Argue Criminal Proceedings Outside Ombudsman Jurisdiction.

As we indicated in our previous article it still remains unclear as to the final outcome of the investigation by COSL however as they noted in their reminder enforcement of the debt should be undertaken via the NCC and not by the police.

Source: CIO News - March 2018

Credit Repair Companies and Removing Defaults

Thursday, March 29, 2018 - Posted by Michael McCulloch

Recently we have again seen an influx of requests by credit repair companies requesting that payment defaults or Judgments be removed from consumer credit files.

Typically these requests are received after a debt has been paid in full or settled with consumers being told by credit repair companies that they can remove a default. Such a request usually involves the credit repair company forwarding a default removal request and a signed privacy consent form with reference to Section 2.23 of the Credit Reporting Code of Conduct. Of interest in receiving these requests is a demand that the request be complied with within 10 business days. This is in fact incorrect in that the credit repair companies are making reference to the repealed Part IIIA of the CRCC:

That aside the formal stance from Equifax regarding the removal of defaults can be found on their page Can I Have Information Removed from My Credit File?

Generally speaking a default will only be removed if:

  • the entire listing is incorrect;
  • the debt is Statute Barred;
  • the listing was a result of unavoidable circumstances and a new arrangement entered into with the Credit Provider

It is our recommendation that should such a request be received that:

  • you conduct a thorough review of your Code issued Notices to ensure strict compliance including the timing of the issue of each Notice;
  • copies of any such Notices be forwarded to the credit repair company;
  • it is clarified that the listing will not be removed; and
  • that correspondence received from them quoting repealed Part IIIA of the CRCC could be interpreted as misleading and deceptive conduct and future references to this section may be reported to ASIC.

If you believe that you may require an opinion regarding the legality of any such request you can contact Collection Law Partners by phone or email to obtain written advice.

Image Source: Office of the Australian Information Commissioner - Privacy Business Resource 3: Credit Reporting - What Has Changed

Disclaimer: The information contained in this article does not constitute legal advice and should not be used as such. You should obtain your own independent legal advice before acting or relying on its content.

Comcare Increase Attempts To Recoup Overpayments

Tuesday, February 27, 2018 - Posted by Michael McCulloch

Comcare, a statutory authority of the Australian Federal Government as the insurer, regulator and scheme manager of the Work Health and Safety Act 2011 and the Abestos-Related Claims (Management of Commonwealth Liabilities) Act 2005, has allegedly increased their attempts to recoup payments for cases it previously accepted liability for.

Figures released to a Senate committee show an increase in overpayment letters being issued by 77% for the 2014 to 2017 period. Comcare has claimed that there has been no change in approach or policy that has led to the increase of the overpayment letters and claims that it is not clear if the increase in claims has impacted upon the figures. The agency did claim that while there may have been an increase in overpayment letters being issued that a record number of debts are also being waived or written-off. 

Manager for Slater & Gordon's Comcare team, Abraham Ghaleb, said, "It's absolutely terrifying for people and it's an abhorrent behaviour for a Commonwealth department. When I'm getting the evidence together [the prospect of an overpayment claim] always has to be in the forefront of my mind, 'is this a potential argument that Comcare will raise?' and 'how do I deal with it?"

Comcare has rejected any suggestion and improper behaviour and said in a statement, "Case reviews and debt recovery have had little impact on the Comcare scheme's financial position. The scheme achieved full funding (100 per cent ratio of assets to liabilities) in 2016-17 for the first time in seven years. The biggest drivers of this recovery were sustained reductions in new claims, a strong focus on early intervention and better return to work outcomes."

Source: The Canberra Times - February 2018

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