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Debt Collection News


Released every month our debt collection blog contains news, stories and tips to keep you informed.

Typo Error Results in Creditors Statutory Demand Being Struck Out

Friday, March 29, 2019 - Posted by Michael McCulloch

In a recent matter before the Supreme Court in Victoria a Creditors Statutory Demand has been set aside by the Court on the basis that the demand was incorrectly addressed.

By way of background the Plaintiff, Mills Oakley, commenced proceedings against the Defendant, Assets HQ Australia, in the District Court in NSW and obtained a Judgment in October 2018. A Statutory Demand was issued in respect of the debt for $158,905.67 which remained unpaid. Pursuant to s459C(2)(a) of the Corporations Act a company is presumed to be insolvent if it has failed to satisfy a Statutory Demand within 21 days of service being effected.

In the proceedings Mills Oakley v Asset HQ Australia Pty Ltd [2019] VSC 98, the Plaintiff relied on non-payment as a presumption of insolvency and commenced wind-up proceedings in the Supreme Court however Solicitors for Asset HQ Australia argued that there was insufficient evidence of the Statutory Demand being served. The basis of this argument focused around:

  • the registered companies address being noted as "Pacific Way" rather than "Pacific Highway" on the Demand;
  • the company claiming to have never received the Demand; and
  • the Plaintiff being able to prove that service was affected by Australia Post.

In the decision handed down it was determined by the Court that as there was insufficient evidence of service being effected. The Court was not satisfied that the Demand was served at the Registered Office of Asset HQ Australia and noted in the Judgment:

  • the Demand was not addressed exactly as it appeared in an ASIC search;
  • the claims by the Plaintiff that there was no "material difference" or "practical difference" between "Way" and "Highway" was not to the point. "Way" was not the Registered Office of the Defendant; and
  • The fact that the envelope was not "returned to sender" is insufficient evidence of the Demand having been served.

Judicial Registrar Matthews who heard the matter has indicated he will hear from the parties as to future progress of the matter and Costs.

Unfair Financial Difficulty Policies

Friday, March 29, 2019 - Posted by Michael McCulloch

Case Study - Unfair Financial Difficulty Policies

Issue: There were concerns that a bank's financial difficulty policies and procedures for its home loans were not compliant with section 72 of the National Credit Code (NCC), clause 28 of the Code of Banking Practice (CBP), and the AFCA Approach to Financial Difficulty.

The financial firm’s hardship policies prevented it from offering hardship solutions if a customer had been in long term financial difficulty and had previously failed to adhere to hardship agreements, or where the period of delinquency was significant. This means the financial firm refused to consider options such as a serviceability test followed by a capping arrangement, and instead focused on alternative repayment options which were unaffordable in light of the circumstances.

Outcome: Following our identification of the issue, the financial firm updated its hardship policy to offer more sustainable solutions. This included having practical discussions with customers experiencing financial difficulty to assist them to overcome their hardship.

The firm also offered capping arrangements for investment properties on a case by case basis. Training was provided to the firm’s hardship team to ensure that the updated policies were implemented correctly.

Application: Policies should not automatically exclude a customer from receiving hardship solutions due to long term hardship and issues such as high arrears or long periods of delinquency. Instead, financial firms should assess each request for assistance on an individual basis, and place an emphasis on the customer demonstrating their ability to service the loan.

If a customer has a positive change in circumstances that allows them to restart payments on a loan, they could be offered a repayment trial followed by capitalisation of arrears – the repayment trial could be the usual minimum monthly payment (MMP), interest only payments or loan term extension with reduced MMP.

Alternatively, if the customer has received hardship assistance over an extended period and they are still unable to meet the repayment schedule, then it may be appropriate to decline further hardship assistance, but instead consider other options such as a timeframe to permit the asset to be sold to repay the debt.

This article originally appeared in AFCA News and has been reproduced with the permission of AFCA


Changes to Consumer Defaults

Friday, March 29, 2019 - Posted by Michael McCulloch

It is being reported by Equifax that the Office of the Australian Information Commissioner (OAIC) has provided a view that all defaults will now be recorded as a paid status regardless of whether the debt is paid or settled.

Previously Creditors had the opportunity to record a debt as being settled where a reduced amount was accepted however the OAIC has advised Equifax that by 15/02/2019 all existing accounts listed with an "S" code (settled) must be converted to a "P" code (paid). Default informaiton also being submitted by IQ Connect, XML or Data Enrichment Systems by Creditors will also need need to follow the new definition of a paid default.


When Can a Default Be Included in Your Credit Report

Friday, March 29, 2019 - Posted by Michael McCulloch

It's a question that is often asked and something that we have covered before in our article Recording Payment Defaults however is there a time-limit on when a credit provider can list a payment default?

The Office of the Australian Information Commissioner (OAIC) states in their Privacy Fact Sheet 35: When Can a Default Be Included in Your Credit Report -

Yes, a credit provider cannot wait more than 90 days after issuing you with the second notice to list the default.
If the credit provider does not disclose the default to a CRB within that 90 day period, it must send you another notice informing you of its intention to list the default. The credit provider must then wait at least another 14 days before disclosing the default to a CRB for inclusion in your consumer credit report.

You can find the answer to this question and more by visting the OAIC fact sheets page here.


Maintaining a Mail Log and Default Notices

Friday, March 29, 2019 - Posted by Michael McCulloch

You may take it for granted that when a Default Notice is issued that the customer receives the Notice however what would happen if legal action was commenced and the customer defended the action based on not having been issued with a Default Notice? Would you be able to prove service?

The ability to swear an Affidavit that meets the Courts requirements is paramount in having any such Defence struck-out with the Supreme Court repeatedly ruling that where service is effected by post several elements must be proven. These elements include:

  1. the envelope bearing the correct name and address of your customer;
  2. the envelope containing the relevant documents being served;
  3. the envelope bearing the correct cost of postage; and
  4. the envelope being placed in the post.
Having an accurate and up to date mail log that is maintained in a central location would assist in helping to prove a document has not only been issued but also posted. An affidavit at the time the notice was posted that covers the above points would be an alternative, albeit may not be practical.

For more information regarding the Courts requirements please speak with a qualified legal practitioner at Collection Law Partners.

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

AFCA Rules Consultation

Friday, March 29, 2019 - Posted by Michael McCulloch

In our February 2019 edition of Debt Collection News we reported that the Australian Financial Complaints Authority (AFCA) would be looking at accepting complaints dating back to January 2008. In a recent media release AFCA has now confirmed that they are seeking submissions on the proposed changes to their Rules.

AFCA has announced that the proposed change would see a new section added to their rules which solely pertains to legacy complaints and would only apply for the period 01/07/2019 to 30/06/2020 after which time the proposed new section would be removed from the AFCA Rules. A draft of the proposed new section, Section F, has been reproduced below:

F.1 Application of this Section

F.1.1 Legacy complaints will be dealt with under this section of the Rules as at 30 June 2019. All other complaints will be dealt with under the other sections of the Rules that apply as at the date the complaint was lodged.
F.1.2 Legacy complaints will not be subject to the time limits set out in B.4.
F.1.3 In all other respects, Sections A to E of the 30 June 2019 Rules will apply to legacy complaints unless modified by Section F. In the event of inconsistency between the other sections of the Rules and Section F, Section F prevails as it relates to legacy complaints.

F.2 Requirements for Legacy Complaints

F.2.1 AFCA will not consider a Legacy Complaint:
a) unless it is submitted to AFCA between 1 July 2019 and 30 June 2020.
b) about conduct that occurred and ended before 1 January 2008.
c) in relation to which a decision or determination has been made by a court or tribunal.
d) in relation to which a decision or determination about the merits of the complaint has been made by a Predecessor Scheme or AFCA.
e) that has previously been finally settled by the Complainant and the Financial Firm to whom the complaint relates (other than a complaint which can still be made under the Rules).
f) in relation to a superannuation death benefit.
g) that solely relates to a right or obligation arising under the Privacy Act.

You can learn more, read the consultation paper and provide feedback via their consultation page.

Veterinary Surgeon Says Unpaid Debts is Stealing

Wednesday, February 27, 2019 - Posted by Michael McCulloch

A veterinary surgeon based in Western Australia has recently come out in the Sydney Morning Herald saying that unpaid invoices for veterinary care is ".... essentially stealing from someone".

Dr Belinda Beynon said that in January 2018 that a distressed woman approached the surgery with 2 dogs that had been bitten by snakes. Having spent 13 years working in an emergency veterinary clinic, Dr Beynon, knew that the procedure would cost the owner a minimum of $3,000. The owner claimed to be unable to pay the full balance immediately and would pay $1,500 upfront and pay the balance within the week.

With both dogs surviving treatment the surgery attempted to contact the owner by phone and mail before referring the debt to a debt collection agency who also failed in their attempts to recover the debt. Dr Beynon wrote-off the debt and put it down to a bad experience.

Recently Dr Beynon said that she had new clients come in with a dog that required treatment however was undecided if she should commence treatment or not. Dr Beynon said that while her professional judgement said to treat the animal her business owner experience told her that they couldn't afford to.

While Dr Beynon was able to eventually authorise the treatment through financial assistance she said in a statement, "What I’ve tried to explain to people in the past ... is that what a vet charges is not always related to the quality of the work that they do. I guess I would say ... if you go into a veterinary practice and you request veterinary care, and you promise to pay something and then you don’t do it, you’re not taking away someone’s holiday to Fiji or a fancy piece of jewellery. That might mean they can’t pay their kids school fees that week. They might not be able to pay the drug bill that week. They’re not getting away with something – they’re essentially stealing from someone. Perhaps if more people gave more thought to the families behind the building and the impact it has, then perhaps they might question their own motives a bit more."


Consumer Action Law Cente - "It's Time to Hold Debt Vultures Accountable"

Wednesday, February 27, 2019 - Posted by Michael McCulloch

You may recall that in our June 2018 edition we published a blog ASIC Warns Consumers About Credit Repair Services. The article focused on a campaign being run by ASIC that was designed to inform consumers of the high level of fees charged by credit repair and debt relief firms. This month the Consumer Action Law Centre (CAL) has released an article, "Stop Debt Vultures", again highlighting the need for regulatory oversight of this industry.

As indicated in the article the credit repair and debt management firms operate outside of any regulatory licensing with no minimum requirements for competency, ethical standards or licensing. The reality of the situation is that anyone, regardless of their level of education, character or background, can start a credit repair business. In a statement to the media Gerard Brody, CEO of the CAL said, "The promise of fixing your debt worries and getting you back on track just doesn’t live up to reality in our experience. The fact is they can charge hidden and high fees, they can mislead about what it is they can do, and leave people in further debt."

With Australian household personal debt being one of the largest in the world, the CAL are asking that ASIC create a robust regulatory framework to ensure that credit repair and debt relief firms are held to a higher standard.

We will continue to monitor developments in this area.


Farmers to Benefit from New Mediation Scheme

Wednesday, February 27, 2019 - Posted by Michael McCulloch

With the Government set to adopt all 76 changes recommended by the Royal Commission into Misconduct in Banking, including amending the Australian Financial Complaints Authority (AFCA) Rules to accept disputes dating back to January 2008, it appears as though farmers will also benefit with the Commissioner calling for a national farm debt mediation scheme.

Both The Weekly Times and Beef Central are reporting that the Federal Treasurer, Josh Frydenberg, has indicated that the Government would look at introducing a new farm debt mediation scheme which would require financiers not to charge default interest on agricultural loans in areas considered in drought or impacted by a declared natural disaster. Financiers would also be required to ensure that only those experienced in agriculture would manage distressed farm loans.

In the original interim report released by Commissioner Hayne he commented, "Properly used, however, mediation may allow the lender and the borrower to agree upon practical measures that will, or may, lead to the borrower working out of the financial difficulties that have caused the lender to treat the loan as distressed. Ordinarily, then, I consider that lenders should offer farm debt mediation as soon as the loan is classified as distressed. If used in conjunction with rural financial counselling services, early farm debt mediation should allow wider and better choices for the lender and borrower about servicing, and ultimately repaying the loan."

Fiona Simson, President of the National Farmers' Federation said, "The Royal Commission shone a bright light on Australia's banking sector, on which Australian farmers are heavily dependent. Justice Hayne's recommendations and the Government's affirmative response, has recognised the unique situations farm businesses often face and the always unequal playing field when negotiating with the big banks."

Minister for Agriculture and Water Resources, David Littleproud, released a statement on his website which you can read here.


AFCA to Accept Complaints Dating Back To January 2008

Wednesday, February 27, 2019 - Posted by Michael McCulloch

Following the final report from the Royal Commission into Misconduct in Banking it has been revealed that the Government is proposing a change to the Australian Financial Complaints Authority (AFCA) Rules which will allow them to deal with disputes dating back to January 2008.

The proposed change would see AFCA being able to investigate disputes about misconduct that have not been dealt with previously by the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) or by the Courts. AFCA has indicated in a media release that consumers and small businesses will soon be provided with information as to the complaints procedure however confirmed that until such as time as the Rules are changed that they cannot consider such disputes.

In a statement to the media AFCA Chief Executive and Chief Ombudsman, David Locke, said, "The announcement from the Government today that AFCA will now be able to consider some of the legacy disputes excluded by the predecessor schemes going back to 1 January 2008, means that many more people will be able to get access to justice and have their matters properly considered. This is a really positive step for consumers and we will be issuing guidance shortly to assist people to bring these disputes to us."

AFCA has also publicly welcomed the Commissioner's recommendation in relation to s912A of the Corporations Act 2001 which will see AFSL holders being required to take reasonable steps to cooperate with AFCA to resolve disputes and release documents.




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