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Posts Tagged ‘debt collection’

Edinburgh Writes Off £230k in Unpaid Debt

Tuesday, April 5th, 2011

Just under £230,000 has been written off by Edinburgh City Council as it has been deemed as “unrecoverable.”

IT has been a bitter pill for Council Cheifs to swallow after finally admitting defeat in their debt collection attempts in which they had attempted to recover the outstanding mount by “all possible means of debt recovery.”

Despite recovery efforts dating back to financial year 2009/10 £228,392 remains outstanding.

The figure itself is made up of a variety of council services such as unpaid council tax, business rates and other payments for council services and the debtors themselves consist of both individuals and companies who are considered to not be in a position to make a payment as they are considered to have no monies or assets. The amount has sparked cries of outrage for more effort to be made to recover the outstanding monies from the people or businesses who owe them.

Conservative councillor Alastair Paisley said: “We used to get a list of the irrecoverable debts circulated among councillors, and you could go through them and see that one is because the debtor is in prison, or one is because he is unemployed and has no assets.

“But I used to go down the list and say ‘he’s got several shops, that one’s loaded, and he’s living in a big expensive house’. You sometimes wonder how they decide they are irrecoverable.”

“If a solicitor company took on the debt recovery process on behalf of the council they would say ‘unless you pay this we will take you to the cleaners’. That would help make sure some of these people pay up.”

“We’ve got about £23 million of council tax debt that has still not been collected – any debt collection agency would welcome that business and would work night and day to get that money back. So we need to be trying a lot harder to get this money back.”

Recently released figures have indicated that upwards of 350 people per day are being threatened with court action in Edinburgh for failure to pay council tax with the number of summary warrants issued soared to 95,549 in the year to the end of March 2010, compared to 59,940 two years earlier.

However, city chiefs say a significant sum within the £228,392 will still be returned to the council at the time that any sale of the debtor’s property takes place – so will not be written off indefinitely.

Councillor Phil Wheeler, the city’s finance leader, said: “The council has taken legal steps to ensure that money due to us is paid when individuals sell their properties as an ‘inhibition charging order’ precludes the sale of a property owned by a debtor until the debt is discharged.

“This makes up £182,531 of the debt.

“I appreciate in these difficult financial times we must ensure that all measures are taken to try to recover all debt to the council.”

Debt collection firm files for Chapter 7 bankruptcy

Tuesday, September 21st, 2010

A company that used to specialize in collecting delinquent debt has sought protection from creditors for itself.

The ironic bankruptcy case struck Hudson and Keyse LLC of Painesville, Ohio, which has been open for more than two decades.

The company, which filed for Chapter 7 protection at the U.S. Bankruptcy Court’s Northern District of Ohio, owes more than $63 million to more than 200 creditors, and reported assets of about $288,000, according to Crain’s Cleveland Business. The company effectively closed and fired its 40 employees on September 1. It has downsized from about 150 since 2008.

Hudson and Keyse has been in financial trouble since 2008, thanks to “inappropriate management,” according to CEO Mark Finston. The company owes the most – about $60 million – to Vion Holdings of Atlanta, and the majority of its creditors are vendors. Also counted among those it owes money are several employees due thousands in back wages.

The industry news source Inside Accounts Receivable Management said the company was paying creditors as much as twice the market price for the debt it purchased and attempted to recoup.

Facebook postings can damage users in legal, financial arenas

Wednesday, September 8th, 2010

Comments and pictures parents post on Facebook can come back to haunt them during custody battles, debt-collection efforts and job applications.

A compromising Facebook post “is like a smoking gun in that you can’t destroy it,” said attorney Shawn Kenney, the law department team leader at Thrush Law Group.

Kenney said he’s seen custody cases hinge on arguments of parental incompetence stemming from Facebook posts. He recalled a case in which a father posted a picture of himself proudly displaying a 3-foot acrylic bong. In another case, Kenney said a mother wrote about how she’d been out with her girlfriends “getting trashed for the third time this week.”

“When people put information on Facebook it may not be in their best interest and does come back to haunt them in ongoing litigation involving custody,” Kenney said, adding he’s also seen a mother call her young boy “my pimp” and a father post a picture of himself baring tattoos while posed with a butcher knife, joking that he was a killer.

Divorce attorney Robbie Lewis, who owns the Law Offices of Robert G. Lewis, P.C., has also seen Facebook rear its often-ugly head in custody battles.

“The whole face of discovery in divorce has really changed over the last few years,” Lewis said. “I can’t tell you how many times clients have found out about extramarital affairs through looking through their spouses’ telephones in the middle of the night, or checking their spouses’ e-mail or Facebook accounts.”

Lewis said in the past, clients would hire private investigators to dig up dirt on spouses. Now the evidence can be found with a few mouse clicks.

“People put silly things on Facebook accounts – pictures of themselves or other people in bars doing inappropriate things” that end up presented at trial, Lewis said.

Attorney Grady Wade, who, along with his work in other legal fields, defends clients in debt collection cases and sometimes collects debt for creditors, said while he doesn’t personally use Facebook to investigate debtors, anything people post publicly on Facebook is fair game.

“If they put stuff up there, it’s pretty much for public use,” Wade said. “If they don’t make the page private, then it’s for public use and they don’t have any expectation of privacy.”

The Fair Debt Collection Practices Act, which prohibits abusive behavior and restricts the methods collectors can use to locate debtors, doesn’t prohibit using social networking sites.

Wade said third-party debt collectors aren’t allowed to publicly shame debtors. For instance, a collector couldn’t become a friend of a debtor under a false pretense and then post something on his wall about him owing money.

The restrictions don’t apply to the creditors themselves, Wade said, adding that he’d advise clients to record any contact with a third-party collector.

Tucsonans applying for jobs at the University of Arizona, the region’s second-largest employer, had best clean up their Facebook profiles.

UA human-resources manager Chris Wolf said managers dig up whatever information they can to vet job prospects, and Facebook is within limits.

“If a candidate regularly references violent behavior, then that may be a red flag,” Wolf said. “It’s more likely that a hiring manager will discover that someone references topics such as their political views – irrelevant when it comes to determining whether they can perform well, yet it may create an unintended bias.”

No matter the context, Kenney said people should stop thinking of Facebook posts as semi-private announcements to close friends. He recalls a mentor’s advice from decades ago, advising him to be careful about what he put in writing and says it applies to social networking sites:

“Never put anything on there you wouldn’t want on a billboard on the highway,” he said

Banks write off record levels of family debt

Friday, September 3rd, 2010

Cash-strapped families are being overwhelmed by debts they can never afford to repay, figures revealed yesterday.

Between April and June banks and building societies were forced to ‘write off ‘ £3.5bn, around £40m every day, the largest amount since records began.
The alarming Bank of England figures highlight the nightmare facing millions who borrowed money before the credit crunch to fund a lifestyle they could not afford.

The largest chunk of write-offs – a record £2.1bn – was credit card debt, with many spending more on the High Street in a day than they earn in a month.

A further £1.2bn came from overdrafts, personal loans and hire purchase agreements. Just £184m was from ‘bad’ mortgages. Before the credit crunch struck in 2007 the bill for write-offs, where lenders accept they will never be repayed, came to just £1.9bn.

Yesterday debt experts insisted the figures prove that although the recession is over, its impact is only now emerging as unemployment rises and pay remains frozen.

Mark Sands, director of personal insolvency at the accountants RSM Tenon, said: ‘We are seeing the impact of the downturn really starting to hit now.

‘It is not necessarily that people have lost their job, but they have lost their overtime, an extra shift or have had a pay cut. They can survive for a while, but suddenly they are tipped over the edge and they cannot cope with their debts.’

He predicted the number being plunged into insolvency would hit 140,000 this year, the highest ever.

Michael Saunders, an economist from the investment bank Citigroup, said: ‘The reason is simple – we borrowed too much money and people are losing their jobs.’

Over the past two years, nearly 800,000 have become unemployed, with many more set to follow as the Government’s austerity measures start to bite. To make matters worse banks and building societies have also been increasing the interest rates they charge on loans, credit cards and overdrafts.

This is despite the Bank of England keeping the base rate at 0.5%, the lowest in history, since March last year.

Since then the average rate on a £5,000 personal loan has jumped from 12.15% to 13.14%. Average rates on credit cards are up from 15.7 to 16.7% and overdrafts are up from 18.6 to 18.9%.

Meanwhile, a report from online debt forum iva.co.uk has revealed the ‘shocking depth of despair’ among many who have been plunged into debt.

It found 30% have considered suicide or self-harm ‘in response to the stress caused by being in debt’ and one in four have turned to ‘excessive use of alcohol or drugs’ to try to cope with the problem.

The majority of those who took part in the poll had debts of more than £55,000, double the average salary in the UK. Half blamed their debts on ‘overspending’, with many using easy credit to fund a lifestyle they could not afford and thus leading to debt collection.

Forum spokesman Andy Davie warned: ‘The number of people in serious debt is only going to increase.’

A spokesman for debt charity the Consumer Credit Counselling Service said: ‘We think a lot of the pain caused by the recession has been deferred. Once interest rates start to rise, which they inevitably will, or there are mass public sector job cuts, the situation is going to get even worse.’

Before the credit crunch, a typical £150,000 mortgage cost £1,127 a month on a standard variable rate of 7.69%. Today it costs just £785, but is guaranteed to go up if the expected rise in interest rates takes place.

A spokesman for the British Bankers’ Association said: ‘In a recession, it is inevitable there will be write-offs as a result of people’s financial circumstances changing. But, throughout the reporting season, the main banking groups have held the view that the worst of these impairments should be behind us.’

Brokerage starts debt collection proceedings against former partner for £184,000 loan

Thursday, August 26th, 2010

It has been reported that London financial services firm, St James’s Place, has launched a High Court claim against its former partner, Peter Carron.

The claim is part of debt collection proceedings to claw back a £184,000 loan, according to a report on industry news site, Citywire.

Carron is the owner of collapsed brokerage, Primrose Associates, which was placed into liquidation in June of this year, along with Evaluate Technologies, which was also owned by Carron.

The companies folded with £4 million of client money feared missing, as reported on Debt Management Today at the time.

St James’s Place has since offered £2 million in compensation to Carron’s clients, although a spokesman for the firm stated that this was unrelated to the debt collection process for the £184,000 loan given to Carron.

City of London Police are still probing the collapse of Primrose, and how client money came to be lost. Last month a 41 year-old man from South East London was arrested on suspicion of fraud, as part of the investigation into Primrose.

Some reports have said this man is believed to be Carron. Police have now released him on bail.

More Arizona Cities Outsourcing to Debt Collection Agencies

Tuesday, August 24th, 2010

If you are an Arizona citizen who owed money for power, gas or water then chances are that you will be, or will have, had contact with a debt collection agency.

As the Cities of Arizona struggle for cash, they claim that their staff lack the necessary skills and resources, not to mention time and expertise, to track down and chase outstanding accounts. By outsourcing to debt recovery companies the cities say that it will help to keep utilities costs down.

Last year the city of Mesa outsourced it’s delinquent accounts to a debt collection agency and recouped $1.4million while Peoria has been outsourcing to debt collectors for eight years.

The utility billing and revenue manager for Surprise says the city started using a collection agency and recovered 32 percent of past-due water and sewage bills.

Gym offers late members a fresh start

Tuesday, August 10th, 2010

Planet Fitness has admitted that sloppy debt collection was behind the announcement of an amnesty offer last week, which could see thousands of its members being let off the hook for arrears.

The company, which has 24 gymnasiums across the country, said last week that while it was legally entitled to recover outstanding money from its members, it had to find a way to be fair and reasonable.

“We have decided to write off as much as 70 percent of money owing from an estimated 61 000 people,” said Mark Lambert, the head of customer services.

The 16-year-old company had turned more than R340 million in outstanding debt over to debt collectors.

“We realised that we are not experts at debt collecting,” Lambert said. The company said it had been “too soft” on debt collections. “We have been handling it internally for the past two years and the process is not as effective as it should have been,” he said.

Planet Fitness has now outsourced the process.

Lambert said that many members claimed they were not aware of their outstanding debt but that the company had records to prove its correspondence with members in arrears. “At the end of the day, we just want to be fair and the biggest objective is to retain members,” he said.

While the company would also write off the legal costs of pursuing outstanding debt, it was in the middle of a roll-out plan, which would eventually culminate in an additional 15 fitness centres across the country as well as the prospect of expansion into Nigeria.

“These write-offs are obviously a huge loss to us but it will not stop us expanding our footprint,” Lambert said.

The amnesties apply only to the auto-renewal portion of the debt. “The portion of the debt relating to initial contract periods with payments in arrears will still be actively recovered by our debt collecting company,” he said.

The amnesty, which is valid until the end of October, gives members a number of options.

Debt will be written off for those who were members years ago and who owe money relating to that period, but who have subsequently rejoined the gym and are active members.

People who rejoin the gym before the end of October will also be pardoned.

Gym members owing between one and 12 months’ membership fees will have the debt reduced by half and a renewal of the time period owed in membership time.

“For example, if a member owes six months at R’ a month, they will only pay for three months and receive a remaining three months worth of free membership at the gym,” Lambert said.

Trudie Broekmann, a senior associate at Webber Wentzel law firm, said provisions in the Consumer Protection Act, which partially came into force in April, were intended to prevent consumers from being tied to fixed-term contracts with automatic renewal clauses.

“The act regulates how auto renewal will work as form October 24, 2010. It will require suppliers to notify consumers before a fixed-term agreement will expire and unless consumers expressly agree to a renewal, such a fixed-term agreement will continue after its expiry date on a month to month basis,” she said.

“A consumer may cancel a fixed-term agreement at any time by giving 20 business days’ notice.”

Stoke-on-Trent writes off £4m of council tax debt

Monday, August 9th, 2010

Tougher debt collection systems have been put in place in Staffordshire after a council was forced to write off almost £4m in unpaid council taxes.

Stoke-on-Trent City Council said it had a “history of horrendous arrears” and had written off £3.8m in unpaid council taxes over the past year.

It said some debt was due to people missing payments in the recession.

Other problems were identified and new systems have been brought in to prevent a repeat of the losses, it added.

Little improvement in debt collection time for IT majors

Friday, August 6th, 2010

After keeping a tight leash on collections during the global downturn, the Day Sales Outstanding (DSOs) position for the top three Indian IT services companies either increased or stayed flat for the quarter ended June 2010.

DSO position reported by top rung IT vendors in Q1FY11 shows that both Infosys and Wipro saw debtor days rise in June quarter, compared sequentially and to the year ago period.

India’s largest IT services company, TCS, reported a flat DSO position on a year-on-year basis, but higher when compared to March quarter.

However, market watchers are not worried about June DSO metrics, as many attribute it to the spike in invoicing volumes in Q1 as also the rising share of fixed price contracts in the overall business kitty.

DSO or debtor days refer to the ratio between accounts receivables and revenue. Simply put, it is a measure of the time taken for service providers to get customers to make the payment for services rendered.

Thus, a low DSO figure means that it took the company fewer days to collect accounts receivables.

The DSO comparison (see table) is not necessarily to pit one vendor’s debtor days against the other, but to compare each company’s June quarter metrics with their previous performance.

“There are a lot of factors that can impact DSOs, including the fixed price mix. Even though there may not have been any improvement in the DSO position for June quarter, I would not worry…it is not as if working capital is getting blocked on account of debtor days,” said Mr Harit Shah, an analyst with brokerage Karvy Stock Broking.

For TCS, the DSO stood at 77 days in June quarter (against 71 days in March quarter and 77 days in the year ago period) attributed largely to significant growth in invoicing.

“DSO conveys the volume of invoicing relative to the total sales and the rise in DSO has been on account of spike in volumes. In the case of TCS, close to 81 per cent of accounts receivables are less than 45 days. These invoices have been generated in the latter half of June quarter and would already have been collected,” a source said. In just-concluded quarter,

TCS saw volume growth of over 8.1 per cent.

For Infosys, the debtor days came in at 60 days against 59 days in Q4FY10 and 56 days for Q1 FY10.

For Wipro, it was pegged at 65 days for Q1FY11 versus 61 days in Q4FY10 and 60 days for Q1FY10.

“As of June 30, 2010, our day sales outstanding was at 65 days due to increase in unbilled revenue, 78 per cent of our debtors are less than 30 days and less than one per cent is more than 180 days,” Wipro’s Chief Financial Officer, Mr Suresh Senapaty, had said at a earnings conference call with analysts recently.

A company insider attributed the increase in unbilled revenue to fixed price contracts where the ratio between effort and billing is not fully co-related.

In other words, while the revenue may be recognised based on percentage completion method in such contracts, the payment becomes due only when certain milestones are reached.

Debt collectors on the chase for HMRC

Thursday, August 5th, 2010

HM Revenue and Customs has confirmed it will use debt collection agencies over the next year to chase individuals and firms holding £140million of tax debt.

Having looked at using external collection agencies for some time, and following what HMRC called a “successful” pilot, the taxman has now signed up four agents.

It added that, in their task of focusing on lower value debts, each debt collection agency (DCA) will operate under “industry and HMRC standards.”

The statement follows warnings that private collection firms could act in a way that HMRC wouldn’t, or shouldn’t, because HMRC’s code of conduct is just for HMRC.

Sounded by accountants, the concerns were over how a debtor would be treated, including but not limited to the security of their personal details, which will be shared with the agencies.

However before the debt is passed to one of the four DCAs, the Revenue will write to the taxpayer, and provide them with a final opportunity to pay or settle their liability.

Nick Lodge, director of debt management and banking at HMRC, says the agencies offer the department “additional capacity” in tackling those people who refuse to pay what they owe.

“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,” he said.

“But those who simply refuse to pay have to be pursued, and our partnership with the debt collection agencies ensures they will be.”

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