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.
AFSA has released its provisional Bankruptcy Statistics for FY 2015, showing an overall decline in Bankruptcy.
There was a significant drop in the number of full Bankruptcies, over 7% Australia wide. This is likely because of an economic cycle of continuous record low interest rates with no major spikes in unemployment.
Part IX Debt agreements lifted slightly, an extra 200 cases (approx 2%).
In a previous post, the Credit Ombudsmen Service ("COSL") was proposing to exclude credit repair style companies from accessing COSL's free services, as authorised representatives on behalf of debtors.
COSL have released a revised consultation that instead targets the conduct of a representative instead of focusing on the fact the representative charges a fee. There was also an issue that complaints concerning privacy should be dealt with by EDR before being referred to the Office of the Australian Information Commissioner.
COSL have set out a number of circumstances in a guideline where they will deal directly with the consumer instead of the representative where after due warning, the representative does any 2 actions against the guideline.
The guidelines largely follow the ACCC and ASIC Guide to debt collection and include; not disclosing the availability of the free service and EDR provide, obstructing the EDR process, making unreasonable decisions, not informing the consumer of all their options, asking EDR to investigate matters the representative should already know, misleading and deceiving, acting contrary to the consumers best interest.
Feedback we are receiving from our clients with respect to paid representatives who charge a fee, is that these companies are advising debtors to make an EDR complaint that has no basis, and then use this window of opportunity where no action can be taken against them to wither enter into a Part IX debt agreement or proceed to full bankruptcy. This then generates an unnecessary charge from the EDR scheme to the creditor.
It is important to note that this guide to debt collection applies to debt collection agencies, in-house collection departments, Government agencies, Solicitors and others. It is not uncommon for internal collection departments or Solicitors to tell us that this debt collection guide does not apply to them. We refer them to page 1 of the Debt Collection Guideline.
In a previous draft of the guide, debt collection contact hours for telephone contact had been significantly reduced. The new guide to debt collection contact hours are not the same as the draft after many industry concerns were flagged with the regulators.
The updated guide goes through court prosecutions that occurred since the last publication that give good examples of breaches of the Competition and Consumer Act and collection practices that should not be followed.
The emergence of social media is and emerging technologies is also dealt with. We note that it can be difficult to "future proof" such a Guideline at the rate of technological changes we have been seeing, It is important to stick to the core principles underpinning the Guide to Collection when dealing with these new spaces.
For your reference a copy of the guide available for download here.
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;
Choice Australia reviewed Credit Repair Australia's claims that it can solve your financial problems and restore your credit report.
ITSA have released the latest bankruptcy statistics on Part IX & Part X Debt Agreements.
|2008 / 2009||2009 / 2010||% Change|
|Total Personal Insolvency Activity||36,487||36,506||increase of 0.05%|
|Bankruptcies||27,483||27,507||increase of 0.09%|
|Part IX Debt Agreements||8,567||8,428||decrease of 1.62%|
|Part X Arrangements||437||571||increase of 30.66%|
All of the proposals in increases in the income, asset and debt thresholds for voluntary debt agreements have been deferred which is disappointing given the number of Part IX Debt Agreements our clients are experiencing on small debts (with Part IX Debt Agreement providers like Fox Symes heavily advertising this service).
Other changes include: