In the June 2010 Budget it was announced that, following a successful pilot, HMRC would use Debt Collection Agencies (DCAs) operating under industry and HMRC standards to boost HMRC’s debt collection capacity and help the pursuit of lower value debts.

Nick Lodge, HMRC Director, Debt Management and Banking, said:

“We are all expected to pay our taxes on time and most do.

“DCAs give HMRC vital additional capacity, strengthening our ability to pursue the debts of those who decline to pay.

“We do understand that some businesses and individuals are not in a position to pay what they owe and we have put procedures in place to help those who are genuinely struggling. But those who simply refuse to pay have to be pursued, and our partnership with DCAs ensures they will be.”

Before the debt is referred to a DCA, HMRC will write to the debtor providing a final opportunity to pay or reach an agreement with the department.

Debt collection agencies will be used by HM Revenue & Customs is a post from: Federal Management

The National Audit Office (NAO) says that delays to a single tax and pensions system cost HM Revenue and Customs £33m in procurement costs.

In a report (pdf) published on 20 July 2010, the accounting watchdog says that difficulties with the National Insurance and PAYE Service system led to it being deferred twice before it was completed in April 2010.

In addition to the cost hike, its late introduction left the department unable to realise £55m of planned efficiency savings during 2008-09 and 2009-10.

The system has now been rolled out to 650 locations, 23 business units and 28,500 staff. But since April there have been further problems with the quality of employment data and the operation of the new service.

They include a backlog of seven million potential over- and underpayments of tax, and the generation of incorrect employment records because of the system’s inability to match some end of year returns to existing records.

The NAO has called on the department to review its systems for capturing and processing data and to look at standards for data quality submitted by employers.

In 2008 the NAO reported that HMRC needed to improve its debt recovery management, but its latest findings reveal that the department’s ability to improve is constrained by IT limitations.

The new report says that HMRC’s core debt management system supports a number of functions, and that the integrated design makes it difficult to separate certain functions to manage customer contact flexibly. It offers only limited capability to analyse debtor behaviour and prioritise interventions.

In 2009-10 HMRC paid £27.3bn in tax credits. It estimates that, based on 2008-09 awards, error and fraud resulted in incorrect payments of between £1.95bn and £2.27bn.

However, the NAO reports that in 2009-10 the department launched a new strategy for reducing fraud and error. This included comparing tax credit data to other systems and targeting areas such as income discrepancies.

The new approach has produced positive results, says the NAO, and in 2009-10 error and fraud worth £356m was identified.

Amyas Morse, head of the National Audit Office, said: “The administration of tax in 2009-10 by HM Revenue and Customs has been influenced by three broader issues: the recession, which has increased the value of tax debt to be recovered; the pressure on the department to streamline its processes; and the effectiveness of its information systems.

“Those systems need to be developed so they improve the department’s ability to monitor and assess the targeting and performance of its debt collection campaigns and to design future interventions in the areas of greatest risk.”

This article was originally published at Kable.

IT delays cost HMRC £33m is a post from: Federal Management

Commenting on the figures, Gingerbread’s chief executive Fiona Weir explained that child maintenance was vital for children in separated families and that the scale of the debt was ‘truly shocking.’

MP for Broxbourne Charles Walker said: “The Child Support Agency was not one of the greatest ideas of the early 1990s. We need to make sure that people who have children are responsible for them and that parents are making contributions towards there maintenance and up keep. I am disappointed that so much money is outstanding and we need to discover a way to ensure in the years ahead that the situation improves.”

In the last year, the Child Support Agency missed its debt collection target by £23million collecting £147million of arrears against a target of £170million.

MP for North East Herts Oliver Heald said: “I am shocked at the level of outstanding child maintenance clocked up because of the last Government’s failed Child Support system. North East Hertfordshire is not the worst area, but £4.5 million is still massive. I hope the new coalition can eventually tackle this mountain of debt as well as the national one.”

Mercury constituencies rack up £13m in child maintenance debt is a post from: Federal Management

A Democratic state lawmaker from Buffalo, the state’s banks and the region’s burgeoning debt-collection industry are fighting a proposal in Albany to tighten state collections rules, reduce lawsuits and prevent abusive tactics by debt-buying firms.

A bill sponsored by two Democrats would impose new requirements on buyers of old debt before they can file lawsuits against debtors and obtain default judgments against them. It would also limit the amount of time debt collectors can collect on old debts.

Banks say the bill would force them to go to court sooner to collect debts and thus make the process more expensive. But supporters say the legislation is intended to plug holes in existing law and address abuses that consumer advocates say harm low-income, elderly and minority consumers.

“It would help to curb a lot of these abusive practices,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project in New York City, which released a report in late May with three other groups, laying out the abuses. “We see it as a real critical piece of legislation.”

They insist the bill would not stop creditors and collectors from pursuing legitimate debt, as long as they are doing it properly and fairly. “It wouldn’t at all impact legitimate debt collection,” Zinner said.

The bill has been blocked by State Sen. William Stachowski, D-Lake View, who is concerned about jobs in Western New York, where debt collectors employ 10,000. He said the bill doesn’t differentiate between “the legitimate bill collectors and the ones who are causing the problems.” A Long Island senator is also opposed.

“I don’t want to see all the thousands of jobs in Western New York leave,” Stachowski said. “We have a lot of people who are getting back into the job market and can work at these places. This bill would just devastate that whole industry.”

Banks and debt-buyers are raising strenuous opposition. Debt collectors say the bill would actually backfire on consumers, forcing creditors and debt collectors to file more lawsuits immediately upon default to ensure that they don’t miss out on the debt. They also say that the bill would drive up costs for debt collectors, hindering their ability to cut deals with consumers down the road.

“I don’t know if consumers realize that that may be the impact of this,” said Barbara Sinsley, general counsel to DBA International, a trade group. “The strategy is going to be harmful to consumers because the debt collectors and the creditors don’t have a choice.”

Banks say the bill would accelerate the process of sending debt to an outside collector instead of keeping it with a lender who probably has other relationships with the customer aside from debt collection. And they say it would result in more harm to consumers’ credit records and less likelihood that consumers who eventually want to pay debts will do so.

M&T Bank Corp. and HSBC Bank USA reached out to Stachowski, who said he received a letter from M&T CEO Robert G. Wilmers.

“These changes would have the effect of making it far more difficult and expensive to collect debt owed on consumer credit contracts in New York, reducing consumers’ access to credit and raising its cost,” the New York Bankers Association said in a memo opposing the bill.

The bill passed the Assembly on June 16 and is pending in the Senate. It’s sponsored by Sen. Eric Schneiderman, a downstate Democrat, who is also running for state Attorney General. The state Legislature completed its session early this month, but the Senate has to come back to finish the revenue portions of the budget.

The practices of debt collectors have long been a source of controversy, as firms proclaim their right to ensure that consumers pay what they owe while consumer advocates decry the methods that are sometimes used. In particular, advocates denounce debt buyers — firms that purchase old debts for pennies on the dollar and then keep whatever they collect.

According to the advocates’ May report, debt buyers “routinely” violate state law by filing meritless lawsuits against low-and moderate-income consumers without proof of their claims and without proper notice to them that they are being sued. As a result, the report said, consumers don’t appear, and debt buyers win default judgments nine times in 10.

The proposed Consumer Credit Fairness Act would require that debtors be properly served with notice from the court of a lawsuit against them, giving them a chance to defend themselves.

The legislation would require collectors to submit more information to the court and lay out the facts about the debt, including proving they own it or have the right to collect it.

Finally, the bill would cut the statute of limitations for debt collection to three years from six, identical to Arizona, Arkansas, Delaware, Kansas, Louisiana and Maryland. And it would eliminate any right to collect after that expires, as in Wisconsin and Mississippi.

Proposal on Buying Old Debt Opposed is a post from: Federal Management

The number of enquiries lenders made to credit bureaus for the purpose of tracing and debt collection jumped almost 16% in the three months to March to 18,57-million, the latest quarterly credit bureau monitor report shows.

Over the same period, the number of enquiries made as a result of consumers seeking to take out new credit fell almost 5%.

Enquiries to credit bureaus, which store the records of SA’s 18,2-million active borrowers, are made by both consumers and lenders, and the reasons for inquiries include providing sales leads for new credit products, vetting new loan applications, and debt collection and enforcement.

The growth of enquiries for debt enforcement purposes in the three months to March, the fourth straight quarter to show vigorous debt collection-related inquiries, shows lenders are now calling in their loans. “Credit providers are more and more starting to follow up and enforce where they have arrears,” National Credit Regulator CEO Gabriel Davel said yesterday.

Further evidence of this comes from the figures illustrating the deterioration of the South African consumer’s debt profile. The number of people with credit records marked as “impaired” — those with accounts three months or more in arrears, with an adverse listing such as “absconded” or a judgment order against them — rose to 8,37-million, or 46% of all active credit users.

While this suggests a continued deterioration of the sort seen for the past three years, the quarterly decline came from increases in adverse listings as well as judgments and administration orders — moves sparked by debtor action.

The “natural” deterioration of debts that fell into three or more months in arrears — reflecting a failure by debtors to keep paying their obligations on time — actually improved, with this category of debtors improving slightly to 17,2% of the total from 17,3% in the December quarter.

In contrast, adverse listings grew to 17% from 14,6%, and the category for judgments and administration orders rose to 13,7% from 13,3% as a proportion of all debtors.

“It’s not as if the level of arrears or debt stress is deteriorating,” said Mr Davel. “It’s much more the enforcement of action by credit providers.”

Nonetheless, the overall profile of South African consumer debt continued to worsen in the first quarter. The number of people recorded as being in “good standing” — with accounts marked as current or no more than one to two months in arrears — slipped to 54% of the total from 54,7% in the December quarter, to a total 9,84-million people.

The pace of both deterioration of good records and the growth in impaired records was faster in the March quarter than either measure saw in the December quarter. Still, both measures show smaller changes than they did midway through last year, leading Mr Davel to repeat earlier comments that the worst may well be over.

Others repeated the sentiment.

“Nonperforming loans have peaked. Generally, financial services institutions are more bullish about the future,” said David McAlpin, CEO of Cape Town-based PIC Solutions, a credit risk consultancy.

Still, other reports show loans for big-ticket vehicle loans and homeloans are growing more slowly than shorter, unsecured types of credit.

The number of active credit accounts grew in the March quarter to 64,75-million, from 63,94-million in the December quarter. This increase was almost double the increase of 400000 accounts seen in December from September.

This was a sign of debt stress, as cash-strapped consumers took advantage of better credit availability to take out loans to tide themselves over, consultancy Econometrix said in response to yesterday’s report.

Mr Davel disagreed: “Small amounts of credit have grown much more than mortgages or motor vehicle loans. Does that indicate stress? I’m not certain.”

Credit providers in drive to recover bad debts is a post from: Federal Management

Arabian Business quoted Radha Stirling, founder of Detained in Dubai, a London based charity that advised people who have fallen into legal trouble in the Emirates, as saying in a report, “I have spoken to people who have said they are being chased by debt collectors.”

But the British debt collectors “are not following through on their threats” as they do not have any power to force the repayment of loans owed to UAE lenders, she added, saying, “I think it is a scare tactic and I think the Brits are on to it and pretty much ignore them anyway.”

“As there are so many debt collection agencies in the UK, it is very easy to employ one and their terms are quite good,” Stirling said.

She believed that only those who owed a considerable amount of money were being chased in Britain “as it wouldn’t be worth chasing the smaller debts.”

In January, Dubai mortgage lender Tamweel reportedly hired a company to pursue an Indian customer and threatened to take legal action in India and the UAE if the customer did not repay its loan.

Under UAE law, bouncing a check is a criminal offense that can result in a jail sentence. Blank checks are commonly used to underwrite financial arrangements, such as credit cards or bank loans, to guarantee future payments, according to Arabian Business.

A research by the UAE’s RAK Bank last year showed that up to 2, 500 UAE residents skipped the Gulf nation each month without settling their debts, it said.

UAE Lenders Hiring UK Debt Collectors is a post from: Federal Management

The U.S. Department of Education appears to be saying no, at least for now, to the dismay of consumer rights and government transparency advocates.

The department says it is just temporarily removing from public view its procedures for the companies it hires to collect from defaulted student borrowers. Education says it is “reviewing” what should be public. Once the review is “complete, we will re-post all appropriate information,” the department says. Meanwhile, the department directs borrowers having trouble making payments to its Guide to Defaulted Student Loans.

But many outside the government are worried. The guide designed for borrowers is incomplete, says Deanne Loonin, a student debt expert for the National Consumer Law Center. The site designed for collectors gives borrowers updates on changes to rules and practices “you can’t get anywhere else,” Loonin says. Loonin would regularly compare what debt collection agencies told her clients with the laws and specific procedures posted on the collectors’ site to make sure her clients were treated fairly and legally. She says this is the first time she started using the site in 2004 that she has noticed the department hiding the collections procedures from the public.

Many transparency advocates also worry that the department’s move contradicts the Obama administration’s lofty rhetoric. “A democracy requires accountability, and accountability requires transparency,” President Obama declared in a memo on his first day in office. “Agencies should take affirmative steps to make information public. They should not wait for specific requests from the public. All agencies should use modern technology to inform citizens about what is known and done by their Government,” the president ordered.

Kathleen Day, a spokeswoman for the Center for Responsible Lending, a borrowers’ rights organization, says the rules and procedures should be public “to make sure that everyone is playing fairly, and to prevent abuses by debt collectors …If you believe in the free market, there has to be a free flow of information,” she argues.

Last year, the department posted its full 292-page rulebook for the private collection agencies it hires to deal with people who are behind on their federal student loans. A student loan industry analyst, Tim Ranzetta, summarized it on his Student Lending Analytics Blog,. The government took the rulebook down from its site after a few months, but Ranzetta posted the manual on his site. Earlier this spring, I downloaded a copy, and wrote a blog post and an article giving tips gleaned from the manual. Borrowers who don’t read the manual might not be aware, for example, that federal student debt collectors are permitted—but not required —to accept settlements as low as 90 percent of the debt.

I called the department before I published my articles to make sure the 2009 rulebook wasn’t outdated. Instead of verifying any information, a department spokesman said the manual had been posted by mistake. He asked me to kill the stories because the government wants borrowers to pay every penny they owe, and borrowers might not do that if they knew that a smaller settlement was possible.

But legal and consumer rights experts I checked with argued that all citizens and borrowers should have access to debt recovery rules and procedures. “I don’t see any legitimate interest in the government keeping private this information (regarding their recommended standard operating procedures in dealing with student debt), particularly where it has already disclosed the same information to non-govermental actors, and those with resources to hire lawyers,” emailed Gary Blasi, a UCLA law professor and specialist in public interest law.

Shortly after my posts hit the Web, the department removed from public view almost all of the other the collections rules and procedures it had posted. I have been calling and emailing for weeks asking who is performing the review of the collections information, when the review will be finished, and whether borrowers’ interests are being taken into account. Not only have department officials refused to answer, but the spokesman I’ve been dealing with insists that the vague answer quoted above only be attributed to the department and not to him by name.

The debate over how much collections information the government should share with borrowers is starting to attract the attention of a larger audience, including the Center for Public Integrity.

Who Knows Debt Collection Rules? is a post from: Federal Management

During this time when the Government is under intense scrutiny and pressure as a fallout of bailing out the banks, it makes good political sense to defend struggling homeowners against a threat of repossession by aggressive mortgage lenders. Measures announced by Coalition Ministers yesterday are specifically designed to protect the family home, which is regarded as a social and economic priority.

The reforms mentioned have been recommended by a mortgage strategy group and although they have been adopted by Cabinet, they are still limited in nature but this won’t matter as the move will be seen as a welcome relief to many thousands of families.

One of the key points of relief will be the prohibition n the imposition of penalty or arrears charges while borrowers are in dialogue to arrange a suitable and timely resolution to clearing the arrears. From the Government’s side, it has extended the mortgage interest supplement scheme to include families where one spouse is working..

There is, as Financial Regulator Matthew Elderfield said recently, no silver bullet solution to mortgage arrears because homeowners could be incentivised to breach their financial obligations. But he has undertaken to act swiftly to implement these reforms and to ensure that borrowers are treated fairly. The International Monetary Fund also accepted the need to protect vulnerable homeowners from repossession, provided the relief measures were narrowly targeted. That has happened on this occasion. But it also suggested the banks, which have been bailed out by the State, could absorb the initial costs of such a scheme.

A range of forbearance measures has been proposed by the mortgage strategy group in its report. The group will now consider how loans might be modified, through reducing interest rates, extending maturity dates, rolling up outstanding interest and a lending institution taking equity in a home.

In addition, the reform of debt enforcement; the regulation of debt recovery and debt collection agencies and the establishment of a central debt enforcement office will be reviewed. A considerable amount of work is involved. Following a report by the Law Reform Commission, however, there is broad agreement that bankruptcy laws should be modernised and debt enforcement procedures removed, where possible, from the courts.

The revised programme for government undertakes to protect families who are experiencing difficulties with their mortgage repayments. About 32,000 mortgages have now been in arrears for three months. Some progress is, however, being made. Last February, a six-month embargo on financial institutions taking legal action for the non-payment of interest on a home loan was extended to a year.

Taoiseach Brian Cowen has spoken of minimising the number of home repossessions while Minister for Finance Brian Lenihan has asked lending institutions to recognise the efforts of those trying to repay their debts. These measures will provide some welcome relief for stressed families.

New Rules For Aggressive Mortgage Lenders is a post from: Federal Management

The above figures shows an increase of 3.9% since 2008-09 and by 69% since 1997 when there was an outstanding amount of £48m.

The news follows on the back of announcements that councils are having to cut costs to plug deficits that have arisen due to the outstanding debt.

David Rosser, director of CBI Wales, said: “In the current climate debt management and prompt collection of monies due is something that all businesses have been focused on and the same should apply to public sector organisations that are owed money.

“They clearly need to distinguish between those who can’t pay and those who won’t pay. For the former they have to show some level of understanding, for the latter they need to be as rigorous as they can be in collecting.”

At the start of the 2009-10 financial year councils across Wales had £78.1m in arrears outstanding and during this time period they managed to recoup £24.8m in repayments, made £3m worth of reductions on bills that had been overcharged and wrote off £6.5m worth of debts, leaving them with £43.7m in arrears.

During 2009-10, council tax bills worth £1.06bn were sent out, with £1.02bn collected, a rate of 96.4%, and £723,000 written off as bad debts, leaving £37.4m still to be paid from last year’s bills and a total of £81.1 outstanding.

The £7.2m written off was the highest yearly amount recorded in the past 13 years.

Chief executive of the Welsh Local Government Association Steve Thomas said: “That sounds like a lot of money, and it is a lot of money, but at the same time those collection rates are excellent, particularly at a time of recession.”

He said councils had been criticised in the past for pursuing people too vigorously for unpaid council tax and not taking into account people’s financial circumstances.

At £12.3m Cardiff council has the highest outstanding bills in the country.

A council spokesman said: “As the capital city of Wales our arrears are always going to be the highest because we are collecting the most. We also have to take into account a lot of different factors that many other authorities don’t have to face such as a large transient population.”

Blaenau Gwent Council is owed an average of £113 per chargeable dwelling, the highest ratio in Wales.

A council spokeswoman said: “Council tax payments for previous financial years are still coming in and we are satisfied our debt recovery policy is robust.”

Some councils are more successful in keeping arrears low – Pembrokeshire is owned just £22 per chargeable dwelling.

Describing the low arrears as a credit to the taxpayers, council leader John Davies, who is also the WLGA leader, said: “Their prompt payment enables the council to operate at its maximum financial capacity and greatly assists in funding key council services.”

Local government consultant Jeff Jones, former Labour leader of Bridgend council, said although collection rates in Wales were very good compared to parts of England, councils often lost track of debtors when they moved out of an area and opposition to the poll tax may have created a reluctance among some to pay local taxes.

He said the tax was seen as unfair by many. “It isn’t linked to the ability to pay. We need to look at a better way of funding local government. There should be a tax based on property but there should be other taxes.”

Welsh Councils Owed Over £81m in Council Tax is a post from: Federal Management

When it comes to getting paid the majority of people think of handing over gods and receiving cash but for small businesses it can be a much more challenging, time consuming and expensive distraction from growing their business.

A CSA approved debt collection agency like Federal Management is ideal for a small business who is experiencing difficulties in getting payment. A company can spend many weeks chasing up a payment and getting nowhere but Federal Management can and do get results within days.

In these current tough economic times there is a greater focus on businesses being paid for their goods and services. Federal Management collects millions of pounds each year for companies who experience this exact problem utilising cutting edge collection methods and state-of-the-art technology.

For more information on how Federal Management can help your business call free on 0800 043 6922 or e-mail enquiries@federalmanagement.co.uk

Why Debt Collection Is Crucial For Small Businesses is a post from: Federal Management