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.
New figures from the Australian Financial Security Authority (AFSA) this month reveal that a record number of West Australians are being forced into bankruptcy.
During the December 2017 - March 2018 quarter there were 545 bankruptcies recorded which equals the largest number of bankruptcies in the State since 2003 and an increase of 16% compared to the same period last year. Other States and Territories were steady with the number of bankruptcies being filed except in country NSW where there was an increase for the third consecutive quarter.
Adding in Part IX and Part X Debt Agreements into the equation a further 1,020 West Australians faced financial difficulty and entered into Debt Agreements to at least partly satisfy their debts to Creditors.
With Western Australia accounting for approximately 13% of all insolvencies nation-wide, AFSA did note that there was a slight fall in national numbers with Debt Agreements largely declining.
Read the personal insolvency statistics in full for the March 2018 quarter here.
Source: Perth Now - May 2018
Source: AFSA - Media Release May 2018
As is the usual practice this time of year we have received notification that several Courts will not be opened or will have limited staff over the Christmas / New Year period.
As of 18/12 notification has been received from the following States and Territories:
New South Wales
A majority of Registries will be closed from Monday, 25 December 2017 and will re-open Monday, 8 January 2018.
All Registries will be closed from Wednesday, 27 December 2017 and will re-open Monday, 8 January 2018.
Australian Capital Territory
All Registries will close from 4.30pm on Friday, 22 December 2017 and will re-open Tuesday, 2 January 2018.
Magistrates' Court Registries permanently staff during the Christmas / New Year period except for gazetted public holidays.
Supreme and District Court Registries closed from Friday, 22 December 2017 and will re-open on Tuesday, 2 January 2018.
Please remember that our office will also be closed over the Christmas and New Year period with us returning for business on Wednesday, 3 January 2018.
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.
We have recently updated our guide for Western Australia (using the legal system to collect debts) providing information about the inactive case list and what this means to answer a number of our clients questions regarding these notifications.
Part 16A s95A to 95F of the Magistrates Court (Civil Proceedings) Rules 2005 deals with the Inactive Case List.
s95B advises states that where no procedural step has been taken for 12 months a case is placed on the inactive case list (unless otherwise ordered by the court). The court supplies written notice to all parties when a case is placed on the inactive case list.
Once on the inactive case list, the court will only accept the following documents:
Should a case remain on the inactive case list for 6 continuous months the case is then dismissed s95F).
The practical outcome of this is that more costs are involved keeping a case open. There may be legitimate reasons why a debt has not been enforced in the last 12 months (such as a debtor moving address / becoming a skip).
The information supplied in this article does not constitute legal advice and is not intended to be relied on in any way.
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.
In this review of the debt recovery process using the legal system in Western Australia, there is an updated
version our workflow making the process easier to understand and a
clearer range of costs involved at each stage of the process.
The court scale costs (including court filing fee costs, bailiff costs, allowed process server costs and scale solicitor costs) advised are current as at January, and are subject to change. The court scale costs are for undefended matters only.
The legal obligations in Victoria are called Overarching Obligations. They are as follows;
When commencing proceedings, you are agreeing to abide by these obligations. If you do not understand these obligations you should contact us.
Some of the most common defences in the local court are around Section 88 Default Notices. One of the most common defences is to say that the Section 88 notice was either not received or was defective.
Recently a defence has been used that the Default Notice didn’t have the EDR details and hardship details included (the Form 12).
Many clients do a Default Notice and then attach a Form 12 which cover the EDR and Hardship requirements. As the form 12 is not in the body of the Notice it has to be proven that it was sent.
In the recent example the Default Notice didn’t have any staple holes and the debtor argued that the form 12 wasn’t attached and therefore they didn’t have a chance to lodge a dispute with the Ombudsman or apply for hardship.
The clients file note showed a default notice was sent, but didn’t state that the Form 12 was attached.
The magistrate was prepared to set Judgment aside, but fortunately the debtor had no valid defence or argument for hardship. So even though the Default Notice was invalid the debtor didn’t suffer any loss or hardship and in this case the Garnishee was enforced.