Beware of Greek Debts

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EU finance ministers are pressing their indebted and riot-prone Balkan member to embrace a massive austerity plan and plug its debilitating deficit.

But with markets sceptical and the appetite for more bailouts at a low, there are deepening concerns that a Greek meltdown could deal a severe blow to the very European idea of a common currency, and set off a domino effect through Italy, Spain and Portugal.

Yesterday, some European Union leaders said they were confident that Greece would pull itself out its debt crisis under a plan submitted by Prime Minister George Papandreou, who promises to cut expenditure and tighten the country’s notoriously leaky tax system.

Spanish Finance Minister Elena Salgado – whose country holds the rotating EU presidency – said she was not worried that Greece will default.

She refused to discuss the possibility of a bailout in case Greece fails to make debt repayments – fears that have sharply raised its borrowing costs.

“I think Greece is going to do all that is necessary to avoid that,” she said before chairing an EU finance ministers meeting.
A bailout would be a first for the decade-old eurozone, which now looks vulnerable and faces painful, unpopular measures such as budget cutbacks and higher taxes.

Other European governments were less sure – and reluctant to pay for Greece’s failure to manage its debt.

Finland’s finance minister Jyrki Katainen bluntly said the Greeks couldn’t expect “any outside help”. Dutch Finance Minister Wouter Bos said the Greek plan to cut debt needs to be more substantial because it is based on vague one-offs such as a promised fight against corruption.

Markets are also sceptical that Greece can make the cuts that are needed. BNP Paribas currency strategist Ian Stannard said investors believe they “lack detail and in some respects appear unachievable”.

Stannard cited the risk of investors losing their appetite for Greek bonds, 70 per cent of which are held by foreigners.

Bigger, better off countries such as Germany would be faced with leading a bailout, but it’s not certain that their leaders – or voters – would agree. Meanwhile, other countries with heavy debt loads – Spain, Italy, Portugal, Ireland – would have to pay more to borrow if investors flee government bonds because of Greece. Read More

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NZ Debt Binge

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THERE WAS no let-up in the rate at which finance companies dragged defaulting debtors into court in the eight months to the start of December.

Just over 4800 people were hauled in front of district courts to have summary judgements recorded against them for unpaid debts owed to finance companies, a symptom of the damage done by New Zealand’s credit boom and bust.

In many cases the judgements, most for less than $10,000, will be the first step towards bailiffs arriving on the doorstep and eventually bankruptcy for delinquent debtors.

That figure compared with the nearly 4000 who received similar judgements in the 6 1/2 months to mid-April, indicating there was no overall slow-down in the pace at which debtors were held to account by lenders.

New Zealanders went on a credit binge in the past decade, which, when combined with mortgages, resulted in the average household debt spiking from 74% of disposable income in 2000 to 177% in 2008, though in many cases it was much higher.

Topping the chart for judgements sought and awarded against debtors was once again Evolution Finance, the debt-collection arm of listed company Cynotech run by Allan Hawkins.

Hawkins was chairman of Equiticorp, the most notorious of the listed companies which collapsed in the 1987 sharemarket crash, and he served time in prison after being found guilty of fraud.

Evolution sought and received 571 judgements from the courts, though once the figures for sister companies Cynotech Securities, Cynotech Finance and Budget Loans are taken into account, Hawkins’ firms were awarded 752.

Cynotech is currently collecting the remaining car loans of failed finance firm Provincial Finance, which it bought from receivers, and is shopping around for other books of consumer loans to buy and chase.

The total even topped the combined 694 judgements sought and awarded to Financial Holdings and Jade Financial Services, the two debt collection companies of the Oldham family, which also own Beneficial Finance. Beneficial was one of the earlier finance companies to collapse, owing mum and dad debenture investors millions, but it is on track to pay them all back under moratorium. READ MORE

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Settlements Now More common for Debt Collectors

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Columbia, MD — Executives at Debt Shield, a Maryland-based debt settlement company, are alerting their clients and consumers everywhere about a recent survey demonstrating the growing success of debt settlement.

About half of all collections agencies surveyed (54 percent) responded that “more settlement-in-full offers” were being extended to debtors, according to the recent Credit & Debt Collection Industry Confidence Survey. The survey also found that 44.1 percent of debt buyers were also accepting more settlement offers.

According to Debt Shield CEO Phil Fewster, these results show that more and more collectors realize debt settlement is a smart business decision.

“Due to our country’s huge economic downslide, an increasing number of collectors have become much more open to exploring alternative solutions to recapture delinquent monies,” said Fewster.

But it isn’t internal red tape that can make the collection process slow and arduous.

“Unfortunately, the recent surge in the number of debt settlement companies to meet this growing demand by consumers for our assistance was filled by many of the same persons who helped bring down the mortgage industry,” said Fewster. “Naturally this has a lot of creditors nervous.”

Fewster explained that some new and disreputable debt settlement companies have tried to take advantage of current circumstances by enrolling consumers who could legitimately pay their bills.

“Fortunately, companies such as Debt Shield, who have been in the industry well before the boom hit, forged a great reputation and working relationship with many of these collectors,” said Fewster. “Because they know we only enroll consumers who truly cannot afford to keep up with their minimum monthly payments and likewise cannot afford a credit counseling program, the collectors can forego much of the time-consuming, high-cost research and collection tactics they would otherwise need to invest.”

Because Debt Shield can improve the profit margins and reputations of creditors, creditors in turn are more likely to offer concessions when debt settlement clients need them most.

“In essence, we are slowly converting our business from one that engages in a confrontational negotiation with our client’s creditors to one in which we can sit side-by-side with collectors to work towards a common goal, which is to return to them as much money as the consumer can legitimately afford,” said Fewster.

The survey also found that more than 85 percent of collection agencies are eager to try new collection strategies in light of declining recoveries.

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Managing Christmas Debts

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Keeping with budget this Christmas is essential to ensure that there are no additional overdraft charges in the new year, Moneynet.co.uk has advised consumers.

For those who find that they are getting paid a couple of weeks early, they should be careful that they do not overspend, as this could lead to a strain on cash in the beginning of 2010.

Any consumers who are concerned they may stray into their overdraft this holiday period should arrange an extension with their bank now, as this will avoid them receiving any extra costs.

Andrew Hagger of Moneynet.co.uk said: “Failure to check the state of your current account and adopting a worry about it later attitude could see you run out of cash and faced with some hefty bank charges come the new year.”

The decision last month by the Supreme Court not to force banks to repay overdraft charges meant that an estimated £2.6 billion in fees was not returned to consumers

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UK Borrowers paying of unsecured debt

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Borrowers are taking steps to pay off their unsecured debt at the moment, one industry analyst has noted.

According to Pierre Williams, head of research at MoneyExpert, people are “busily” paying off their overdrafts and loans. He noted that this shows that people are paying attention to the message that they need to live within their means, especially in the uncertain economic climate that is currently in place in the UK.

Mr Williams said that the fact that people are taking these steps is pleasing. “It’s encouraging that people are making the most of this situation as low interest rates won’t be with us forever and, when they do rise, those people who have failed to pay off debt could find themselves in hot water,” he concluded.

Mr Williams made his remarks after the Bank of England published figures which indicated that unsecured loans fell by £713 million in October.

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NZ Company debts hurting

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New Zealand firms are hurting each other and setting themselves up to be locked out of the credit market as a result of the way they are prioritising payments, according to research released yesterday.

Dun and Bradstreet (D&B), a leading credit reporting, sales and market data and debt collection company, said the research showed that eight in ten firms were prepared to miss supplier payments if they were unable to pay all their accounts.

Half of firms were settling their bills late as a result of cash flow issues or because their own customers were paying delinquently. D&B general manager John Scott said firms were hurting each other and themselves.

The research showed that many firms were unaware of the implications of paying late on their ability to access credit. Six in ten firms indicated that if they knew late payments would detrimentally impact their credit standing they would be more likely to pay on time.

The finding comes at a time when financial institutions and trade credit providers continue their stringent focus on trade reference checks as part of the credit assessment process. “Cash is absolutely critical to business survival and prosperity in an economic recovery,” said Scott.

“However, the payment habits of New Zealand firms are making cash flow management increasingly difficult.”Around half of firms admit to paying their bills late – this is causing cash flow to come under increased pressure despite improving economic conditions.”

Scott said firms were indicating they would be willing to miss payments to their suppliers – the very payments that were recorded on their credit file and assessed by lenders and trade credit providers when they applied for funds.

“This means firms could find themselves unable to access credit as lenders continue their vigilant focus on risk management.”

Scott said the likelihood that a credit provider was unaware of a firm’s poor payment behaviour was very low.

The Business Payment Priorities Study follows D&B’s latest economic and risk forecasts which show that despite renewed business optimism, it could be some time before executives’ confidence is translated into business actions that support the real economy. While cash flow issues remained prevalent, business investment and hiring intentions would continue to come under pressure. D&B was forecasting real GDP growth of 1.1 per cent in 2010.

NZPA

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Managing holiday debts

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The holiday season seems to lure us into overindulgence. Eating too much stuffing or drinking too much eggnog is one thing. Charging too many gifts on your credit cards is another.

Although the holiday season may entice you to spend more than you can afford, a little self-discipline can help you keep your purchases to a manageable limit.

Why You Should Limit Your Holiday Card Purchases
Credit cards are only an illusion that can buy more gifts than you actually can afford. Here’s why you should limit your credit cards purchases this holiday season.

Gifts bought on credit end up costing more. Add in months of finance charges and you’ll ultimately pay more for your gifts than you would if you’d used cash.
Credit scores fall from high balances. Spending more than 30% of your credit limit will cause your credit score to drop.
The best laid plans…. Unexpected post-holiday expenses might postpone your credit card payment plan, lengthening your credit card debt.
By sticking to a few spending principles, you can keep your holiday spending to a minimum and avoid paying for holiday gifts until the next holiday season.

How To Avoid Holiday Debt
When you’ve made the decision to keep your credit card purchases within a reasonable limit, here’s how to put it into practice.

1.Save up. Spending cash instead of using credit for your holiday purchases allows you to avoid holiday debt all together. If you haven’t started saving, put aside something each paycheck starting now and use that to finance your holiday purchases.
2.Set a budget before you shop. Setting a spending limit and sticking to it will keep you from overspending. Be disciplined and don’t go over your budget, no matter what.
3.Make a list. Santa makes a list and checks it twice, so should you. Even though you might feel compelled to splurge on everyone in your life, you don’t have to. People appreciate simple and meaningful over expensive and useless.
4.Don’t shop for yourself. Avoid the “one for you, one for me” shopping mindset. You’ll end up spending double what you would had you shopped only for the loved ones in your life.
5.Ignore “big” sales. More often than not, they’re not really sales at all. Those “Buy 2, Get 1 Half Off” deals only trick you into buying more than you would otherwise. Remember, stick to your list.
6.Shop online first. The internet makes it easy to shop around. It also makes it harder to buy on impulse. Since most retailers have inventory on their websites, you can decide exactly what you want to buy before going to the mall.
7.Leave your credit cards at home. Without your credit cards, you’ll have a hard time charging them up. If you must use credit for your purchases, pick one credit card and stick to your spending budget.
8.Don’t buy if you can’t afford to pay. Keep in mind that when you use credit, you’re borrowing from your future income. You know your finances better than anyone. Only charge what you can afford and you’ll avoid paying on your holiday debt until the next holiday season.

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