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Archive for November, 2009
Thursday, November 26th, 2009
Many Indian companies are stepping up background and credit checks of prospective employees.
As the economy rebounds and hiring begins to pick up pace, companies are going to unprecedented lengths with sweeping background and credit checks of prospective employees. The scope of pre-employment screening, which has been traditionally limited mainly to senior executives and involved basic searches to verify the accuracy of the resume, the educational background and biographical data, is now getting vastly expanded. All job applicants, not just those at senior levels, are being scrutinised with a fine toothcomb. And almost no area is off limits.
While false claims about education and employment are among the main triggers for rejection, some job applicants have been tripped up by their personal lives. One such was denied a job after an agency specialising in background verification discovered that the individual was having an extra-marital affair. The agency asked the prospective employer, a multinational company, to put the application on hold by filing a ‘pink’ report and the employer obliged.
“In our lingo, green means a go-ahead, pink is doubtful and red signifies rejection,” said SK Sharma, group director-HR at PremierShield, a security solutions company that carries out background checks on behalf of corporates. A red flag can be activated by a number of other factors: criminal history, substance abuse, a poor credit track record for debt collection or even dodgy equity trading. While former colleagues, classmates and those living in the applicant’s neighbourhood are tapped for information, some agencies go even further.
PremierShield admits to setting up sting operations to test for ethics and some companies infiltrate staff into the organisation where the applicant is working to gather information about the prospective employee’s conduct with colleagues, especially women.
Arun Bhagat, vice-president, HR, with infrastructure group GMR said he visits colleges and universities and at least two past employers to do reference checks of candidates. It recently sacked an employee just days after he joined after it was discovered that he had falsified some documents. “For key roles in finance and at executive levels, we make discreet enquiries on the reliability of the professional, his reputation in and outside the organisation and even carry out a search on the internet,” he said.
Mr Bhagat insists that the checks are carried out with the consent of the prospective employee. Software and back-office service providers were among the first to make background checks mandatory for all potential hires. Many IT companies and HR consultants like Ma Foi engage firms such as First Advantage, PP Verify, PremierShield, Onicra, Authbridge for pre-employment screening, which can cost between Rs 1,000 and Rs 5,000 per employee.
Pinkerton Consulting & Investigations India, a detective agency, which undertakes screening for several multinational firms, found in a recent survey for IT and IT-enabled Services providers that about 4,000 companies, universities and institutes of dubious background were providing fake documents. Pradeep Bahirwani, vice-president (talent acquisition) at Wipro said that in the IT industry the average percentage of fake resumes is 20-30%. “Based on preventive and corrective actions less than 1% of the total active applications we receive would be fake,” he added.
Among other sectors, the financial services industry, which hires an estimated 75,000 employees every year, is now actively adopting the practice started by IT companies. Battling a marked rise in the incidence of fraud by employees — a recent study by risk consultancy Kroll showed that fraud is increasing twice as fast in the financial services sector than in others — companies are snooping on potential hires more than ever before.
Tags: background checks, credit checks, employee checks, india
Posted in Debt News, Financial News | No Comments »
Tuesday, November 24th, 2009
The enforceability of hundreds of millions of pounds of credit card debt with be affected by legal test cases at the end of this month.
Manchester High Court is the venue for five days worth of time for twelve seperate cases to be heard which will help to determine a variety of legal issues under the Consumer Credit Act (CCA), with several of the cases being brought forwards by Cartel Client Review, a prominent claims management company.
Carl Wright, of Cartel Client Review, is hoping that a favourable decision is reached that will forced the bank and credit card companies to settle thousands of similar cases on his books.
“We want the judges to rule on these claims, providing precedents which will prevent the banks and credit card companies delaying on paying out on consumer claims any longer,” Mr Wright says.
This past year has seen an unprecedented amount of court action between lenders and borrowers with tens of thousands of similar cases yet to be heard.
Borrowers are aguing that the debts against them cannot be enforced because lenders have failed to follow CCA guidelines which the law states “a lender cannot ask a court to enforce a debt if the lender’s original agreement failed to comply with certain requirements.”
“Once you have established the agreement is defective, in at least one of a number of specific ways, the court has no discretion to grant an enforcement order in favour of the creditor,” says barrister Oliver Mishcon.
However, due to a new Consumer Credit Act in 2006, this lack of discretion for judges only applies to regulated consumer credit agreements entered into before April 7 2007.
The new CCA agreement states that loan agreements for fixed sums or credit cards must contain three “prescribed terms”:
- the amount of credit; or the limit of the credit, or the manner in which the limit will be decided
- the rate of interest
- how the borrower is to repay the debt.
Bob Imrie, who trains trading standards officers and also claims management firms in the operation of the CCA, is doubtful that the courts will let people escape their debts, saying “Courts are not very sympathetic to claims that terms and conditions were not provided to customers. You’ve got a real problem trying to undo an agreement on a technicality; you’ve got to provide evidence the banks behaved wrongly.”
However, the potential use of the law to favour debtors was highlighted by a case in October this year at Stockport County Court.
Deputy district judge Howarth issued a decision in favour of a Mr Yates, so that his credit card debt of £6,585 can never be collected.
Mr Yates had run up the debt after taking out the MBNA card in 2003.
In January 2009, the debt was sold, or “assigned”, to a debt collection firm and it swiftly took Mr Yates to court to get the money back.
He argued that the copy of the original agreement supplied by MBNA to the court was incomplete and illegible, and so it was unclear that the prescribed terms had in fact been included.
Th debt recovery did not turn up for the hearing and lost by default, but at the request of Mr Yates’ lawyers the judge went on to declare that the debt was unenforceable.
Mr Yates’ solicitor, Alun Thomas of law firm JW Hughes in Llandudno, says he has 300 similar cases on his books.
“There are solicitors up and down the country handling many more and there are many cases, but almost all of them have yet to be decided.”
Tags: Cartel Client Review, CCA, Consumer Credit Act, debt collection, Manchester Crown Court
Posted in Debt News, Financial News, International Debt News | 1 Comment »
Monday, November 23rd, 2009
Over £11 billion in unpaid taxes is being written off by the Government this year as tax revenues continue to fall as the recession continues to bite.
Recently released figures show that £27.7 billion of tax went unpaid in 2008-2009 and out of the amount, £11.2 billion has been written off by Her Majesty’s Revenue and Customs (HMRC) as bad debt. This is an increase on the year previous which had figures of £25 billion of unpaid taxes with £7.9 billion written off as unrecoverable bad debt.
Analysts have said that the non-payments will pose additional issues for the Treasury, adding to an already steep decline in receipts from income tax and corporation tax, which looks set to struggle in sync with the recession.
The Treasury have said that bad tax debts, which were revealed in the HMRC annual report, were a reflection of both the current economic downturn and changes in policy. An increase in debtors, falling debt collection rates and increases in corporate and personal insolvencies also had blame placed upon them.
Lord Myners, the Treasury minister, said that of tax uncollected almost 90 per cent was due to business insolvency and that the bad debts accounted for one per cent of all tax. “That is extraordinarily good record of debt recovery which most businesses would find hard to match.”
However, opposition politicians have accused the Government of “astonishing complacency and incompetence” in the chasing and recovery of tax and said that responsible taxpayers were bearing the burden of ministers’ failures.
Lord Oakeshott of Seagrove Bay who is the Liberal Democrat treasury spokesman, said “HMRC is an organisation in meltdown and denial and it is costing honest taxpayers billions when we can least afford it while the cheats go scot free. This rising torrent of tax bad debt, year after year, is a shocking indictment of management failure at HMRC and grossly unfair to honest taxpayers.”
The party calculates that the tax written off as bad debt will cost the average family an extra £465 a year.
Other revelations to have come out of the report show that the Treasury have been chasing over-payments of benefits worth nearly £2 billion. In parliamentary answers, Lord Myners, the Financial Services Secretary to the Treasury, said “The value of benefit over-payments to be recovered, as on 31 March 2009, is £1.8 billion.” He went on to say that ministers were continuing “vigorously to pursue those who can pay but will not.”
The pre-Budget report, to be unveiled by the Chancellor Alistair Darling on December 9, is expected to announce a crackdown on tax avoidance. Dave Hartnett, the permanent secretary at HM Revenue and Customs, has been conducting a review of the tax system with a view to closing loopholes.
An amnesty over voluntary disclosure of foreign bank accounts or assets will come to an end in two weeks and banks are already providing details of offshore accounts and customers failing to disclose any untaxed assets.
Mr Hartnett, who is leading a team of 20 specialist inspectors, has said that he expects the amnesty will provide details of half a million offshore bank accounts.
Meanwhile, an internal survey of staff morale at HMRC has reported that nearly 70 per cent are unhappy. Only 11 per cent of respondents in the department’s own study said HMRC was “well managed” and the same low number said they had confidence in the management. Only 38 per cent said they believed in the objectives of HMRC while only 25 per cent said they were proud to work there.
Tags: government debt, HMRC, recession, tax debt, unpaid taxes
Posted in Debt News, Financial News | No Comments »
Friday, November 20th, 2009
Connecticut city plans to hire a debt collector to recoup taxes that are more than three years delinquent.
The city issued a request for proposals for debt collector services Wednesday and will open bids next month.
Supervisor of Assessments and Collections Michael Mordarski said the contract will not cost the city anything, since the debt recovery company makes its profit by charging delinquent taxpayers up to 15 percent of their back taxes.
To avoid getting charged the debt collection fee, property owners with back taxes more than three years old should settle their accounts with the tax office now, Mordarski said.
Mordarski said the debt collector would be able to track down delinquent taxpayers that the city cannot get a hold of. There is about $4 million worth back taxes owed to the city up to 2007.
A group of city employees will consider the various proposals. The selected company is expected to begin debt collection in January.
Tags: connecticut, debt collection, michael mordarski
Posted in Debt News, Financial News, International Debt News | 1 Comment »
Thursday, November 19th, 2009
A graduate student with over £19,00 of debt has been offered just shy of £3,000 of store card credit in less than two days … having earned less than £1000 this year!
The 21 year old was offered a total of six store cards with a combined value of £2,750, announced recently by consumer magazine Which? Money.
Posing as a customer, the graduate visited 20 high street stores to buy items between £50 and £100 and asked if he could get discounts if he took out a store card. Despite having 12 credit checks carried out over two days, he was still able to get credit at the end of day two.
Out of the 12 stores, 8 of them filled out the forms on his behalf, not giving him the chance to review any small print or terms and conditions and just requesting he sign the form at the bottom.
Furthermore, just 1 of the 12 stores actually advised the undercover graduate that he would be subject to a credit check. The interest rates charged on the credit ranged from 18.9% to 28.9%, and in one case it would have taken him nearly 21 years to clear the debt if he had made only the minimum repayment each month.
BHS initially offered him a store card with £100 credit, but then sent him a credit card with a £1,500 credit limit, although it had mistakenly used the name of his street for the name on the card.
Which? Money editor James Daley said “No one in his position should be given access to £2,750 on store and credit cards in just two days, or be able to continue getting credit after so many applications have been made in such a short space of time. The question remains whether stores should be handing out credit at all. If shops can’t lend responsibly, then the Office of Fair Trading should step in to make sure they do.”
The group is calling on retailers to work more closely with credit reference agencies such as Creditsure to ensure they know customers’ circumstances better before they lend to them.
It is also calling for sales staff to be given better training and for checks to be carried out to ensure shop assistants are asking for consumers’ permission before credit checks are carried out.
Tags: creditsure, store card credit, store credit checks, which? money
Posted in Debt News, Financial News | No Comments »
Wednesday, November 18th, 2009
The Pedernales Electric Cooperative board of directors considered a debt collection proposal at Monday’s meeting to correct a system that purges $3 million annually on delinquency rates and non-collectable debt.
The co-op also announced a slight rate reduction for electricity and a plan to develop a member “Bill of Rights” and have members vote on bylaws changes in June.
Short-term, mid-term and long-term changes to debt recovery were submitted at the meeting by Eddie Dauterive, member services manager. “The whole goal is to lower our bad debt,” Dauterive told the board.
Short-term adjustments to the debt collection plan include, cooperative-wide guidelines for fee adjustments and delinquency exceptions, up-front deposits and payments for services, social security and driver’s license number databases, and clear collection guidelines for debt collection.
The co-op says the non-collectable debt is less than one-half of one percent of monthly collections.
Tags: debt collection, Pedernales Electric Cooperative
Posted in Debt News, International Debt News | No Comments »
Tuesday, November 17th, 2009
Should there be a complete overhaul of Ireland’s “Victorian” debt laws in order to differentiate between the “can’t pay” and the “won’t pay?”
According to a leading member of the Law Reform Commission, Patricia Rickard-Clarke there should be, who also claimed that various financial institutions took part in “reckless lending” by offering 120% mortgages and should now be penalised for bad practices.
Ms Rickard-Clarke also declared that Ireland’s reliance on the legal system and a myriad of different debt collection methods was “crazy” and it should be centralised in a national debt enforcement office to take much of debt recovery out of the court system and cut down on legal costs. Her comments come ahead of a major conference, ‘Reforming the Law on Personal Debt’, which is scheduled to take place in Dublin Castle next Wednesday.
The conference comes against a backdrop of spiralling credit problems, which now stands at an estimated 395 billion Euros, and bad debt which has led to a nation with a “growing level of personal indebtedness.”
“The legislation we have pre-dates Victorian times — it was there long before the current credit-based society that we live in,” says Ms Rickard-Clarke.
“The first thing that happens when someone can’t pay is that the person who is owed the money goes into court and gets a court order for debt recovery – it’s a very expensive procedure and what’s the point if the debtor can’t pay?” she says.
Ireland currently ranks fourth in an international table of household debt, with a ratio of household debt to disposable income levels standing at 176 per cent.
Tags: Ireland, Irish Debt Collection, Patricia Rickard-Clarke
Posted in Debt News, Financial News, International Debt News | No Comments »
Monday, November 16th, 2009
FMBN (Federal Mortgage Bank of Nigeria) has begun work towards building up support of mortgage financing, while also looking at debt recovery methods for non-performing loans.
At a recent Banking, Insurance and Other Financial Institutions meeting with the Senate Commitee, Managing Director of FMBN, Abdulsalam Ahmed, brought up that the Apex Mortgage Bank has taken steps aimed at achieving a viable housing financing mechanism.
The FMBN boss declared that they have already commenced the process of debt recovery of non-performing loans to improve the institution’s profitability and financial position, adding that within a year and six months, as a medium-term measure, the organisation plans to issue mortgage bonds that will hopefully diversify its resources in order to meet its mandate.
Ahmed said that the nation’s primary mortgage lender is faced with a long list of challenges such as low capital base, under-subscribed National Housing Fund (NHF) scheme, high building materials’ cost, absence of mortgage insurance, huge outstanding loan commitment, debt collection and low income of prospective borrowers. He noted that some short, medium as well as long-term measures are being adopted to turn the fortunes of the organisation around.
According to him, FMBN plans to, within the next six months, issue subsequent tranches of its N100bn bond to refinance the sale of Federal Government houses in Abuja and other parts of the country while supporting legal and regulatory framework review which includes amendment/replacement of unfriendly housing related laws to ease mortgage transactions.
This, he said, is in addition to seeking to consolidate National Housing Fund (NHF) collection and funding operations to improve efficiency and effectiveness of financing workers/contributors’ home ownership.
Ahmed said that the move would involve the pursuit of government’s approval for commencement of matching contributions by employers to complement workers’ contributions and compliance with statutory contributions by banks and insurance companies as provided by the NHF Act.
He said that FMBN is being re-branded and repositioned so as to be better able to function as the foremost secondary mortgage institution in the country and create awareness about its products and services.
“We will attract foreign funding and investments into the Nigerian mortgage sector through the securing of facilities from international financial and multi lateral institutions as well as private international investments once the global financial crisis eases up. We will likewise commence liquidity facility provision for mortgage originators as an expansion of its secondary mortgage operations. Under this arrangement, loans will be bought off originators on recourse or non-recourse basis as a means to providing liquidity to the primary mortgage market.”
“Apart from introducing mortgage and title insurance as new products to mitigate mortgage-related risks and ensure affordability, we plan, in the medium term, to expand mortgage financing to the non-salaried informal sector that has been long neglected due to the lack of property titles, formal income and non-affordability. The long-term objective is for commercial loans, which are suitably adjusted for risk and market pricing, to serve as more acceptable underlying assets for the issuance of financial securities in local and international markets,” he stated.
Tags: apex mortgage bank, Federal Mortgage Bank of nigeria, FMBN, nigerian debt collection
Posted in Debt News, International Debt News | No Comments »
Thursday, November 12th, 2009
A Suffolk warehousing and distribution company is looking forwards to a new future after an overwhelming approval by Creditors to back a Company Voluntary Arrangement (CVA.)
With an approval ratio of 98% the CVA will enable LM Logistics, based in Felixstowe, to secure new investments from Merchant Corporate Recovery PLC, based in London, who will effectively take control of the company as they now own 51% of the companies shares.
Dependent on the success of debt recovery methods, creditors of LM Logistics will receive a payout of between 27p and 41p in the pound.
Tony Barnes, managing director of LM Logistics, who previously held a controlling interest in the business, said the outcome was “testament to the belief in the company by all parties, suppliers, clients, shareholders and in particular the staff who have all played their part in helping the company through this difficult time”.
“The suppliers have been extremely understanding and the company will endeavour to support all those in the years ahead and wherever possible enable them to recover any losses they have suffered. “The clients have by and large stayed loyal to the cause which I believe is a tribute to the staff and high level of services we provide, and also indicates that people realise that our difficulties were not the result of poor management but that we were purely victims of economic situation that has caused so many problems to so many companies over the last 18 months. All our staff agreed to an 8 % reduction in their pay earlier in the year with a couple of people taking voluntary redundancy – I can’t praise the staff highly enough for the support and commitment they have shown in helping to secure the long term future for all concerned.”
Mr Barnes said the manager-shareholders had probably lost the most, having not only given up the majority shareholder and but agreed to write off £192,000 owed to another group company as well as taking pay cuts along with the staff.
He added: “Hindsight is a wonderful thing and looking back maybe the company did expand a little too quickly too soon, but like everyone else we just couldn’t envisage the economic downturn that followed.
“We have spent enormous sums over the last three years to ensure we can provide the highest levels of service and due to the downturn we have not managed to recover these costs through increased rates from our clients.
“Going forward the infrastructure is still in place to benefit our clients for years to come and our quality control systems, integrity of staff, security systems, vehicle fleets and IT Systems keep us well ahead of our local competitors.”
When news of the company’s difficulties first emerged last month, Mr Barnes warned that the agreement of a CVA was vital to securing the new investment and that, without it, the firm would probably face administration.
LM Logistics, based in Parker Avenue, Felixstowe, employs a total of 143 people and operates a fleet of about 30 vehicles. It has a total of 310,000 sq ft of warehousing space, although this is leased rather than owned.
Associated company Syntex Logistics, which was acquired by LM in 2006 and specialises in container haulage, is not involved in the CVA.
Tags: cva, debt recovery, LM Logistics, Merchant Corporate Recovery PLC
Posted in Debt News, Financial News | No Comments »
Tuesday, November 10th, 2009
Financial sector experts are predicting increases in interest rates and charges by credit card companies as they attempt to offset their debt recovery requirements by trying to claw back as much money as possible after seeing a significant increase in the amount of bad debt. The expected move is not coming as a surprise to many as talk about it has been ongoing for some time and is move that will ultimately cost UK consumers, with those who are up-to-date with their payments more likely to suffer in the medium term.
This has been an ongoing situation for some time within the UK credit card industry and in many ways, it has been a self-fulfilling situation as customers who have been squeezed to offset the costs of those who default and miss payments are finding that they are then defaulting and increasing the debt collection requirements cycle. At some point there will inevitably be a balance point reached in respect of default numbers but for the time being it would seem that there is still a large amount of upside for the short and medium terms.
The UK financial sector has been severely damaged by the large amount of write offs of bad debt and, even if the economy were to recover tomorrow, the write offs would still continue for some time and, of course, bring with them a knock on effect for quite some time. There is no quick fix or overnight way out of this particular situation, and interest rate increases n credit cards is probably the last helpful of all options available.
Tags: credit card charges, credit card debt, debt collection, increased interest rates
Posted in Debt News, Financial News | No Comments »
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