A source inside the Ministry of Social Development has told The Wellingtonian the Government is considering using private debt collectors for collecting outstanding student loans.

Revenue Minister Peter Dunne has denied the claim, saying it would only apply to students living overseas.

The Government has engaged consultant company Burleigh Evatt to research private debt collection practices, and has also discussed creating a student finance company to manage the collection of student loans.

Last year in the Student Loan Annual Report, the Government recorded 30 per cent of student loans as an expense, given that they were unlikely to be repaid.

The Wellingtonian requested more information from several government ministers and departments about how the changes to student loans collection would work, but they proved extraordinarily evasive.

Questions about the proposal were sent as Official Information Act requests to Tertiary Education Minister Steven Joyce, Finance Minister Bill English, Social Welfare Minister Paula Bennett, the Treasury and the Inland Revenue Department.

All acknowledged receipt of the request except Ms Bennett’s office.

Mr English’s office informed us its request was being transferred to Mr Joyce and this was followed by the Inland Revenue Department transferring its request to both Mr Joyce’s and Ms Bennett’s offices.

The Treasury transferred the request to Ms Bennett and Education Minister Anne Tolley’s offices, neither of which acknowledged the request.Each time the request was transferred The Wellingtonian was told there would be another 20-day wait for a response.

When the 20 days to respond had expired, the only response we received from the Government was yet another transfer. Mr Joyce transferred the request at the last minute to Ms Bennett’s office.

Initially, when The Wellingtonian told Mr English’s office that we would be running a story on student loans, the office denied any talks about privatisation had taken place. Later that day Mr English’s spokesman demanded the right to comment before we published.

When we subsequently offered Mr English the chance to comment last Friday he declined and referred us to Ms Bennett. She also declined to comment, saying her office had never received the Official Information Act request. On Monday she then passed us on to Revenue Minister Peter Dunne.

Mr Dunne provided a brief written response to our inquiries about administration of the student loans on Tuesday.

“The Government aims to improve services,” he said. “Part of that includes the efficient administration of student loans and ensuring that all loan borrowers repay their loans in a timely manner.”

Mr Dunne denied the Government was planning to create a private student loan company, but said private debt collection practices might be used to collect from overseas borrowers.

“Regularity of payments tends to slip especially when borrowers move overseas,” he said.

“To improve the efficiency, officials have been investigating a number of options, including the possibility of private debt collecting.”

WHAT HASN’T BEEN CONFIRMED

These are the questions which have still not received full answers:

• What is the share structure of the proposed student finance company?Will it be state-owned, privately-owned or a mixture of both?
• How will the shares be issued?Will they be offered to the public?
• Has a preferred owner been established? If so who? Or would ownership be split between banks?
• Would the student finance company be empowered to deduct money directly from an employee’s pay or would the Inland Revenue Department still collect it?
• When is the proposed student finance company expected to take over student loan collections?

Additional questions were also sent to Ms Bennett’s office last Friday. They were:

• Will the payment exemption for low-income earners continue?
• Will the company have the same power to impose late payment penalties and penalty interest as the Inland Revenue Department?
• Will the company be able to seize property or other assets?
• Will the company be able to restrain the travel of people with student loan debts?

Student loan debt collectors? 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

Managing Director of Trafalgar, Andrews Schaefar, said “Landlords battling with late-paying tenants and bodies corporate struggling to retrieve levies can now welcome two recent landmark decisions by the Council for Debt Collectors that clearly rule property managers collecting arrears levies and rentals fall within the scope of the Debt Collectors Act.”

Under the new rulings, all estate agents and property managers who collect rental arrears and levies must be registered with the Council for Debt Collector. This will help regulate any unscrupulous behaviour that may have entered the South African debt collection industry.

“The move has highlighted compliance with the Council for Debt Collectors and associated legislation as being necessary for compliance and transparency,” continued Richard Schaefar.

As a direct result, this move should encourage debtors to improve their individual situation in order to avoid these enforceable penalties.

Schaefer said the Council for Debt Collectors was established to bring clarity to a previously unregulated industry following numerous public complaints laid with the department of justice against debt collectors.

“The Debt Collectors Act provides control over debt collectors and legalises the South African collection system by monitoring their conduct and professionalism and thus promoting a culture of good governance.”

Schaefer said the act worked both ways.

“Tenants who believe they are receiving unfair bias can lay a complaint with the Council and both sides will be heard before a judgment is passed.”

Mr Schaefar then added that a recent decision by the Durban High Court to exclude levies from the National Credit Act debt counselling process was also good news for estate agents and property managers.

“That decision means companies such as Trafalgar do not have to refer to debt counsellors when seeking levies due from owners – and correspondingly that errant owners cannot hide behind debt counselling as an excuse for not paying their bodies corporate levies.”

South African Landlords Fall Under Debt Collection Act is a post from: Federal Management

With the Scottish bank due to end its retail operations from June 18th, it has decided that it wants its 50,000 credit card customers to close their credit card accounts by then, either by transferring to another card provider or by clearing the balance, or face the prospect of being chased by debt collectors.

Halifax has said that it would offer those who were unable to clear their balance, or find a suitable transfer to another provider, the option of converting their card balance into a personal loan but Emmet Pullan of Debt Plan Ireland clams he has been told by the bank that this is not the case and personal loans will not be offered, instead the debt will be sold on to a debt collection agency.

Mr Pullan said “We would feel that customers should be aware of this situation as this proposed action may further impact their credit rating. Some debt collection agencies will have vigorous recovery techniques so customers should prepare to engage them with a repayment plan should the account transfer.”

A spokesman for Halifax/Bank of Scotland said no decision had been made yet on what will happen to those card customers who are in arrears when branches start to close in June. He also confirmed that anyone who fails to make payments on their card for six months in a row is being classed as “in arrears” and they may well find that their debt has been sold on to a debt collection agency if they do not contact the bank.

The Halifax spokesman stressed that customers should try to clear their credit balances by June 18 by switching or paying off the balance.

Halifax to Use Debt Collectors for Credit Card Debt is a post from: Federal Management

In these tough and precarious economic times, there is a very real and rapidly growing culture of late payments in the UK.

For business to business transactions, most firms automatically expect 30 days credit. In fact, if you don’t agree different terms, the law says businesses can take 30 days to pay by default.

If you find yourself lucky enough to be supplying services or goods to very big companies, you will sometimes find they demand 60 or 90 days to pay, or maybe even longer. Often those long payment terms are then passed down the line by over-stretched suppliers, so it is the very small businesses at the bottom of the supply chain that suffer the most.

The biggest problem with this culture is that many businesses see it as perfectly acceptable to extend their 30 days to 35 or longer – without prior permission. It can be a real strain on your cash flow to be waiting yet another week for cash that’s rightly yours!

One of things you can do to improve your cash flow is to be up front with all clients about your willingness to use a debt collection agency, should acceptable credit terms be stretched without permission.

For many businesses, just receiving a letter from an organisation of professional debt collectors is enough to trigger a swift payment. There are clear processes you can follow to help you get paid on time, and know exactly when it’s right to pass the debt onto an agency.

First off, you need to be utterly clear with clients upfront about the terms and conditions of the product or service you supply. You should get a set of standard T&Cs drawn up, and ensure they have a clause laying out the credit terms you offer, and the process you will follow if those terms are broken. At Federal Management, we offer free guidance and assistance on this.

Really you should get a solicitor that specialises in contracts to help you draw up a contract that is most relevant for your business if you do not already have such.

You can also reduce your risk by running credit checks on new customers before you start dealing with them. It may seem like you’re slowing the sale down, but you’ll appreciate discovering potential problems before they happen. Prevention is better than a cure and this is why we strongly recommend that all companies vet their customers prior to giving credit.

At Federal Management, we strongly recommend that you use Creditsure, who offer the UK’s fastest and most cost effective credit checking service. Please click on this link for more information on how they can potentially save your business hundreds or thousands or even millions of pounds.

Prior to using Debt Collectors, It is sensible to send your customer/consumer a final letter politely advising them that they have broken the terms of the agreement and advising what the potential repercussions could be ie, the debt being passed to a debt collection agency thus incurring further costs . Also, make them aware that they cannot order more from you while a debt is still outstanding.

That way you can try to maintain a good working relationship with the client by affording them a final opportunity to resolve the matter without the use of a 3rd party agency. Finally, if you have followed this advice and still not been paid, it really is time to call in a debt collection agency. Many businesses stop at this point. But the reality is if you keep threatening action and don’t follow it through, there is no incentive for your client to cough up and you may as well simply wave goodbye to your money.

Don’t sit on the problem for a few weeks hoping the client will pay. Agencies say the older the debt becomes, the lower the odds of it being paid.

Federal Management is a Debt Collectors agency you can feel comfortable with and can work alongside on all future debts. We offer a level of professionalism that is second to none and the company ethic is ‘firm but fair’.

If you have followed your credit chasing process through to the point of a final letter, the advantages of using us to continue chasing the debt are clear. We have the time, resources and expertise to focus on the recovery of your monies and this allows you to focus on the most important thing which is running and operating your business. Federal Management operates a low cost service and eliminate the stress one associates with ‘chasing people for money’.

So let us take the strain! Take the first step now and call us free on 0800 043 6922 for further information and advice.

When is the Right Time to Use Debt Collectors? is a post from: Federal Management