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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Finance firms set to fail

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NZ Herald reports

A big chunk of the surviving finance company sector is unlikely to outlive the retail deposit guarantee, the Reserve Bank indicated yesterday.

In its twice yearly report on the stability of New Zealand’s financial system, the RBNZ noted that the local banks and their Australian parents had “withstood the crisis better than most” overseas, although they remained overly dependent on offshore money markets and asset quality had deteriorated as reflected in recent results.

However, Deputy Governor and head of financial stability Grant Spencer said the non-bank finance sector, “remains under pressure”.

“Strains are particularly evident in the deposit taking finance company sector where a substantial number of companies are in moratorium or receivership.”

The RBNZ said the same underlying economic issues that were driving surviving finance companies to the wall were also negatively affecting those companies that have secured moratoriums from investors, already driving one into receivership.

The comments come just a day after Hanover Finance said ongoing property market weakness meant it would be unable to make full repayment to debenture investors, as forecast when it sought their approval for a moratorium last year.

READ MORE

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Banruptcy or Settlement?

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For those consumers who can no longer to afford minimum credit card payments, Ethan Ewing, president of Bills.com offers tips to help consumers understand their odebt relief ptions for help, including: “Now that credit card reform legislation has passed, it’s a great time for consumers to take control of their debt,” said Ewing . “To do so, consumers need to understand the available debt relief options.”

Debt settlement. A debt settlement company works on consumers’ behalf to lower principal balances due, often obtaining savings of 50 percent of the total debt. The firm does not make monthly payments to creditors, but rather negotiates with the consumer’s creditors while the consumer accumulates funds for the settlement. Debt settlement firms charge consumers a fee for their services, typically a percentage of the debt enrolled or a percentage of the debt reduced.

Consumers who persist with a debt settlement plan can resolve their debts in two to three years at significantly lower cost than that of a debt management plan. Debt settlement typically provides better repayment terms than a Chapter 13 bankruptcy filing and does not leave a permanent bankruptcy judgment on one’s record.

Debt settlement may have a negative impact on credit ratings and profiles and is best suited for consumers in serious financial hardship who cannot afford to make minimum payments on bills and who cannot afford the higher monthly obligation typical debt management programs require.

Debt management. Debt management companies, also known as credit counseling agencies, maintain pre-arranged agreements with credit card companies to lower interest rates on a consumer’s existing debt to a creditor-issued “concession rate.” Debt management companies collect a monthly fee from consumers, as well as revenue from the credit card companies called “Fair Share” payments.

In debt management plans, monthly payments decrease, but principal amounts owed do not. Consumers who are able to continue with the payment plans typically can pay off debt in approximately five years. Debt management plans also require higher monthly payments than debt settlement programs, and are best suited for individuals who are facing a less-severe financial hardship than a typical debt settlement customer.

Bankruptcy. Bankruptcy Attorneys concur that BK’s can leave a severe negative impact on a filer’s credit rating for many years. Credit repair is not as easy as some debt counselors may lead you to believe. Under bankruptcy reform enacted in 2005, it is harder and more expensive to obtain than it used to be. Under the new law, fewer people can eliminate most consumer debt by filing Chapter 7 bankruptcy, taking more people to Chapter 13 filings. Chapter 13 requires consumers to pay back debt on a repayment plan (which can take up to five years), while still suffering the negative repercussions of a bankruptcy on their credit reports and public records. Generally considered a last resort, consumers considering a bankruptcy filing should speak to a bankruptcy attorney licensed in their state.

Read the complete press release online at http://www.emediawire.com/releases/debt/credit/prweb2493574.htm

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US Consumer credit market shrinking

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Americans continue to hold back on credit card spending as banks slash lines of credit and charge off card accounts at a record pace. The Federal Reserve reported another large dip in consumer credit for September.

The Fed said late Friday that overall consumer credit in the U.S. contracted at an annual rate of 7.2 percent in September, or by a total of $14.8 billion. Analysts had a contraction closer to $10 billion.

September marked the eighth straight month of consumer credit declines.

Credit card debt, called revolving debt in the Fed’s report, led the way once again. Revolving debt fell at a 13.3 percent annual rate or by $9.9 billion to $889 billion. The Fed slightly revised upward the reading from August to reflect an identical 13.3 percent annual contraction rate.

Since September 2008, Americans have shed $86.2 billion in credit card debt. Although many credit consumers restrained card spending, much of the mathematical credit for the plunge can be given to soaring charge off rates at banks.

The Fed said that the annual rate of decline for revolving credit was 10.0 percent in the third quarter of 2009. In the first and second quarters of the year, the annualized rate of decline was 9.6 percent and 9.7 percent, respectively.

Nonrevolving consumer credit – like that found in auto, student or personal loans — dropped at an annual rate of 3.7 percent in September, or nearly $15 billion.

Total consumer credit outstanding in the U.S. stood at $2.455 trillion at the end of September, down from its all-time high of $2.581 trillion in July 2008. The Fed’s report does not include debt backed by real estate

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Debt Settlement Statement

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MADISON, Wis.— Concerned about proposed federal rules that would effectively eliminate its industry, The Association of Settlement Companies (TASC) recently provided the Federal Trade Commission data that supports the value of debt settlement to consumers in response to the agency’s proposed changes to the Telemarketing Sales Rule (TSR).

The FTC is seeking to create amendments—including a ban of advance fees—that would effectively eliminate a viable option for consumers who are struggling with unsecured debt. TASC outlined in a brief historical performance data that clearly illustrates the economic value its member companies deliver to consumers enrolled in debt settlement programs.

For example, based on a recent data analysis of its members, TASC estimates its members settled more than 94,000 accounts representing more than $553 million in debt in the first 6 months of 2009. This is an annual rate of more $1.1 billion in debt settled by TASC members for just 2009.

“We firmly believe that debt settlement should remain an option for those tens of thousands of consumers each year who choose debt settlement as their preferred—and often only available—program to handle their financial situation,” Chris Kesterson, President of TASC, said. “In our response to the FTC, we clearly demonstrate the value consumers receive from our companies who work diligently on their behalf each day to negotiate settlements with creditors.”

TASC is the leading trade group of the debt settlement industry. The cornerstone of TASC’s mission as an organization has always been to promote fair legislation at the state and federal level designed to protect the consumer and to promote best practices of operations by its members.

Without advance fees, debt settlement companies would have to work for free for the duration of the settlement process, which typically takes three years. No company in any industry could accept this, Kesterson pointed out.

“We look forward to working with the FTC in exploring appropriate and comprehensive ways to regulate the entire debt settlement industry, rather than only one segment,” Kesterson said

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Delinquent account placement on rise

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Members of the Commercial Collection Agency Association of the Commercial Law League of America reported that for the twelve months ending in September 2009 compared to the same period in 2008, account placement rose by about twenty-eight (28) percent, reaching $17,286,448,679 in the dollars placed for collection.

Emil Hartleb, Executive Director of CCAA stated, “This is a record account placement but there are signs on the horizon that indicate that the delinquency situation with trade receivables might be stabilizing. The gain in account placement for the third quarter of 2009, compared to the third quarter in 2008, was about 12%. This is still a strong showing but significantly less than the gains registered in the fourth quarter of 2008 and the first and second quarters of 2009 compared to the same quarters in the previous year.” Those quarterly gains were: Fourth Quarter 2008 – 25.4%, First Quarter 2009 – 38.4% and Second Quarter 2009 – 39.5%.

Hartleb further stated, “The third quarter of 2009 when compared to second quarter of 2009 showed a decline in placement of about eleven (11) percent. This reflects to a certain degree the seasonality of the data but it also reflects, we believe, stabilization in the past-due accounts that many companies were carrying in their accounts receivable portfolios. Much of these delinquencies have been placed for collection or payment plans have been negotiated with them. This coupled with a lackluster sales environment for many companies makes a continuation of future very strong account placement questionable.”

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Bad Debts Booming for NZ Debt-Collectors

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The recession may be over but figures released by transtasman debt collection agency Baycorp show its impact is still hitting profit and loss accounts nationwide.

Debt referred to Baycorp, which holds 35 per cent of the market, has been increasing since mid-2007 and is now at its highest level since 2002.

At the same time, the cash collected from debtors has been on a steady decline since mid-2006 and is now at its lowest level since January 2001.

Fewer than four in 10 people who owe money actually stick to the payments they have promised.

Baycorp chief executive Geoff Harper says: “The willingness to pay is almost unchanged. What has changed is people’s ability to pay – this has reduced.”

Debtors are more likely to seek a payment arrangement than pay their debt in full, and the average payment has declined 25 per cent. “People are paying less and taking longer to repay,” Harper says.

There has been a 49 per cent increase in the average amount owed since 2006, and a marked increase in commercial collection referrals. Read More

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Woman ordered to pay $320k proprty debt

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An Auckland woman has been lumbered with a $320,000 debt after she claimed she was conned into buying a house at an over-inflated price.

Helen Rutherford bought the house in Meadowbank for $300,000 more than its worth.

Rutherford was taken to the High Court at Auckland by ANZ National over a loan for the house, and lost.

She told the court she agreed to buy 50 Temple St in Meadowbank on April 5, 2007, from Vijay Enterprises for $850,000.

She said she did not know the house was worth only $550,000.

Real estate agent Philip Cavanagh arranged an $800,000 loan so she could buy the house from his associate Raghu Aryasomayajula.

However, Cavanagh has since been declared bankrupt, leaving ANZ National to chase the money from Rutherford.

The bank pre-approved a loan of $427,000 to Rutherford, whose income was $50,000 a year. Days later she and Cavanagh – then an agent for Barfoot and Thompson Mt Albert – applied to the bank for the $800,000 loan. Read MORE

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Chocolate debt not so sweet

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A primary school’s chocolate fundraiser turned into a debt-collection exercise after parents failed to cough up around $3000.

Birkenhead Primary School’s Parent Teachers Association raised funds by giving pupils boxes of chocolate bars to sell at $2 a bar.

But at the end of the fundraising stint, the Auckland school was $3000 out of pocket, and had to start chasing up parents.

Former PTA chair Vicki Vachias said the association still finished around $600-$700 short. “Most of it came in, a little bit didn’t.”

Vachias said the PTA put the loss down to the recession.

“We just wrote it off as a sign of the times. We just wrote that off as being what happens with some families.”

The event raised about $5500 for the school despite the shortfall.

Principal Nigel Bioletti said the PTA has been active in raising money for the school for a number of years.

“I would think that they would do it again but perhaps there’s a lesson to be learned here. At any school you’re going to have parents that don’t return things. READ MORE

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Debt interest to hit $100 Billion

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New Zealand report

Government debt will climb to intolerable levels by the middle of the century on present policy settings and this is a problem that we cannot simply grow – or tax – our way out of, according to Treasury projections of the long-run fiscal outlook.

That leaves a focus on spending.

The projections have the Government’s net debt, which stands at around 16 per cent of gross domestic product, climbing to 223 per cent by the middle of the century, compared with just over 100 per cent in the previous projections made in 2006.

If that happened the interest bill would be more than $100 billion a year and would dwarf any other item of Government spending.

About half the deterioration since 2006 is the legacy of the financial crisis of the past two years – an end to fiscal surpluses and a shrunken tax base. The rest reflects higher costs of existing programmes and changes to Government policy

Treasury Secretary John Whitehead stressed that the projections are not forecasts of what will happen, but rather where policy, demographics and past trends in factors like productivity growth and migration would take us over the next 40 years if nothing changed.

The projections assume productivity (or per capita GDP) growth of 1.5 per cent a year, in line with the long-run historical trend, and a net migration gain of 10,000 a year. But even if productivity growth lifted to 2 per cent, the migration gain was 15,000 a year and the labour force rose significantly from its already internationally high level, the Government’s net debt would still reach an unsustainable 146 per cent of GDP by the middle of the century.

“Growth alone does not solve the fiscal problem,” Whitehead said. Higher productivity means higher wages, and New Zealand Superannuation is indexed to wage growth, too.

The impact on the fiscal position of another $1 of GDP from higher productivity would be to increase the tax take by 33c but, when that is offset by higher superannuation and public sector wage costs, the net gain to the Government is about 13c.

Higher taxes would reduce fiscal deficits but at the expense of weaker economic growth. READ MORE

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Debt Collection Booming Business

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WASHINGTON — In the often murky waters of the debt collection industry, United Recovery Systems in Houston is considered a “whale hunter.”

In its search for clients, United isn’t looking for mom-and-pop businesses with a few hundred deadbeat customers. It wants bigger fish.

Its client roster includes national banks, international credit card issuers and domestic and foreign auto finance giants, each of whom count on United to make good on their bad accounts.

In the current economic climate, the “whales” are virtually jumping out of the water and into United’s boat. The company is taking in $937 million a month in new accounts, compared with about $550 million a month last year, said United’s marketing director, Sean Keegan.

After beginning the year with 1,200 debt collectors, United has added 300 and will add another 300 by year’s end.

“The volume was so huge that we had to run out and hire collectors,” Keegan said. “I can’t put 5,000 accounts in this guy’s file box for him to work this month. I have to go hire new people.”

United’s growth spurt isn’t an aberration. Across the country, dozens of established collection agencies are expanding their operations and hiring collectors, managers and support staff to keep up with the rising tide of bad debt due to massive job losses.

As real estate values fall, homeowners can no longer tap their home equity to pay down debt. So antsy creditors are farming out more problem accounts to collectors after declaring them as charge-offs, or losses.

With billions of dollars outstanding on millions of past due accounts, creditors want their money now and collection agencies with a track record of success are cashing in. READ MORE

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NZ Debt Facts and Figures

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New Zealand debt forecast for the future

•Treasury estimates showed that without policy changes, gross government debt would rise alarmingly, reaching 48 per cent of GDP by 2013 and 70 per cent of GDP – or about $227 billion – by 2023.


•That level of debt equates to just over $45,000 for every New Zealander. Put another way, it would represent $180,000 of government debt for every family of four – equivalent to a second mortgage on their home.


•Paying interest on that debt would have cost the Government $13.7 billion a year – more than is currently spent on the public health system.


•Debt last peaked at more than 70 per cent of GDP in the 1980s and it took almost 20 years of tough decisions to bring it back to prudent levels.


New Zealands national debt is forecast to reach a maximum of 43 per cent of GDP in 2016/17 and to reduce to about 37 per cent in 2022/23.


The previous net debt indicator is around 2.5 per cent of GDP and the new net debt indicator is around 9 per cent of GDP. Over time, the difference between gross debt and the new net debt indicator narrows because debt is rising faster than financial assets.

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Australians dealing with bad debts

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Veda Advantage bi-annual independent data reveals while most Australians have weathered the tougher economic conditions well, some Australians are struggling with financial obligations and may become caught in long-term debt.

The Australian Debt Study Report by Galaxy Research found 16% of Australians are having difficulty repaying debts and 21% of those who are likely to apply for credit over the next six months say they are currently having difficulty paying debts.

Furthermore, almost 23% of respondents struggling to repay bills owe more than they did 12 months ago.

While the majority of Australian families are managing credit responsibly and continue to pay down debt obligations, a small, but sizeable population of Australians are struggling – creating a debt divide. Veda Advantage General Manager Market and Product
Development Russell Evans says under current laws this group can be invisible until it’s too late. Urgent government action to add comprehensive credit reporting to the government’s credit reforms is needed.

Helping lenders prevent these families falling into a debt trap should be a high priority. But government legislation to allow lenders to see when a borrower is overcommitted is facing continued delays.

Legislation to implement comprehensive credit reporting, an early warning system for borrowers and lenders has still not been drafted despite government committing to legislation within 18 months of August 2008.

Veda Advantage’s report indicates:

More than one in ten (12%) of Australians have missed a required minimum payment in the past three months, with many missing two or more essential household payments. Of the people likely to apply for more credit one in five (18%) have missed a bill payment in the last three months.
Of those Australians with a mortgage, 13% were late paying a household bill in the past three months. One in three respondents is concerned interest or mortgage rates will impact on their ability to repay debts during the next twelve months.

Mortgage holders aged between 25 – 49 years are three times more likely to miss a payment than those over 50 years. Mortgage holders were most likely to miss a telephone or internet bill, followed by a mobile phone bill, credit card, utilities and personal loan repayment.

More than 20% of Australians currently struggling, are likely to apply for more credit in the next 12 months.

Although Australians experiencing financial difficulty aspire to pay off their credit cards, one in five is likely to apply for new credit in the next 12 months.

Australian part-time workers are more likely than full-time workers to apply for new credit to consolidate existing debts.

Australians currently finding it difficult to repay bills are more likely to have children and are more likely not to be working, or working on low incomes.

Australians living in regional areas are worse off than their city counterparts.

Russell Evans, Veda Advantage General Manager Market and Product Development, said it is concerning to see a significant number of Australians are likely to apply for credit despite struggling to meet current financial obligations.

“Credit providers simply don’t have all the tools they need to implement new responsible lending laws, making it difficult for them to detect some struggling individuals.

“Sixteen percent of Australians with debt are finding it difficult to make their payments. This indicates some of these people are in a high risk category, and may seek to take on more debt despite not meeting current financial obligations. There is a real risk these vulnerable individuals will become caught in debt.

“The Federal Government is to be congratulated for implementing new responsible lending laws , but needs to give credit providers the tools they need now.”

“A simple change to the credit reporting laws will allow credit providers to check a borrower’s current credit commitments and repayment history before additional credit is granted. This would protect families from taking on more debt at a time when they need assistance to help them out of debt.

“The Government’s responsible lending legislation, which should pass by the end of the year, is a first step in the right direction to help these Australians. However it won’t be enough. Without access to more transparent information, lenders will struggle to identify families and individuals who are in financial difficulty.

“The Government’s current timetable means this comprehensive credit reporting may not pass for 18 – 24 months – too late to help protect these vulnerable Australian families.

“Australia needs to adopt a comprehensive reporting system. There is a window of opportunity to introduce this change, however this requires swift action,” Mr Evans said.

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City of Debt

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DUBAI, UAE — Default on a loan or bounce a check in Dubai and you could end up in debtors’ prison.

That was the very Dickensian prospect facing Simon Ford, a boyish British entrepreneur whose “alternative gift” business sold rides in hot air balloons and Formula 1 racing cars to the party crowd in this Disneyesque city-state. But the recession has hit Dubai hard and Ford’s business foundered.

When his loans came due last June, he did what thousands of other expats have done. He packed up his family and fled — a few hours ahead of the law.

Ford also left behind an anguished “open letter” to friends and creditors that neatly encapsulates the predicament of many expats in Dubai who took out loans during the flush times and now find themselves out of work and unable to keep up with the payments on their seaside villas and luxury cars.

“I am not running away from debt, I am purely protecting those dearest to me and getting out of a country which, due to the lack of structured bankruptcy laws and a banking system which has zero flexibility on loan repayments, drives people to make horrible decisions,” he wrote in an open letter to local media.

He promised to repay all of his creditors.

Dubai authorities won’t say precisely how many people have been jailed for their debts, but local news accounts put the number at about 1,200 — more than 40 percent of the total prison population.

Even trickier to gauge is how many others took Ford’s route and simply fled. Judging by the number of apparently abandoned BMW’s and Mercedes gathering dust on city streets and the ensuing chatter on expats’ discussion boards, the number is not insignificant.

One recent escapee has written a book about his flight. Herve Jaubert, a former French intelligence agent who used to cruise around Dubai in a red Lamborghini, found the law breathing down his neck after his plans to manufacture “luxury submarines” became submerged in debt.

Jaubert explains that he bolted last year after government interrogators threatened to stick needles up his nose. With 007 panache and a woman’s all-encompassing burqa concealing his frogman gear, Jaubert slipped into the sea, swam out to a police patrol boat and disabled its fuel line so that it could not give chase. He then used a rubber dingy to get safely beyond the UAE’s territorial waters where he was met by a confederate in a sailboat. Eight days later they landed in India.

The book, “Escape from Dubai” comes out next month. But Jaubert’s website has been blocked in Dubai and sale of his book will no doubt be banned here. The Frenchman, now living in Florida, was tried in absentia and sentenced to five years imprisonment for fraud.

A number of U.S. citizens have been imprisoned for bounced checks, but the American Embassy — apparently in keeping with the local custom of casting a veil of silence over disturbing news — declined to provide specific figures

Read more

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Debt reduction ; How to reduce debt

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Some very helpful advice from Wells Fargo on reducing debt

Does your debt outweigh your income? Do you find yourself only able to make the minimum payment on your credit card? Have you gone from using one credit card to two, three, or more? These are some of the standard warning signs of debt. If you recognize any of them in your own financial picture, take action to get your debt under control. Consider the following:

FIGURE OUT WHERE YOU STAND
Before you make a plan to get out of debt, get a sense of where you stand financially. Look over your outstanding debt — credit cards, car payments, mortgage, and student loans — to help you determine what your true needs are and what obligations have become hardest to manage.

Create or revise your budget based on your income and your expenses. Figure out how you can cut back on what you’re spending.

MAKE A PLAN

Call your creditors if you can’t make a payment or need to make a partial payment. Talk to them about payment plans you can afford. Creditors will want to work with you to find a solution. Also consider these options:

Pay off the highest-interest debt first. First pay off the balances of loans, lines of credit, and credit cards with the highest interest rates. Continue to pay at least the minimum due on your other accounts, especially one as important as your mortgage.

Refinance your mortgage. If interest rates have dropped since you took out your mortgage, consider refinancing to lower your monthly payments. You can also accomplish this by increasing the amount of time you take to repay your loan, or by changing the type of mortgage loan you have.

Consolidate your debt. Rolling all of your debt into a single loan won’t immediately reduce your debt, but it may reduce your monthly payments, and having just one bill will make tracking and payments easier.

If you’re a homeowner, you have the additional option of consolidating debt through refinancing or home equity financing. This may allow you to save even more through tax-deductible interest

Limit your credit use until your finances are under control.
See a credit counselor to help you explore your options and make a plan to get you out of debt.

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Debts called in on NZ property developer deals

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NZ Herald reports

Who will mourn the financial ruin of private property developers? Each week brings the fall of more members of this high-living, once-powerful band.

One day, it seems, they have the best clothes and are seen about town with the best-looking models, behind the wheels of the raciest cars.

Now they are crumbling under their creditors and even hocking their bling on the internet.

This week, Starline Group’s Jamie Peters announced his bankruptcy after putting his name to about $1 billion worth of development work.

He’s the developer who was selling his belongings on the internet a while back, including Cartier and Rolex watches, furniture and even his garden palms.

Peters estimated he had sold more than 1500 properties, starting in 1994 on residential work, buying and selling residential units then moving on to bigger commercial jobs and eventually developing part of Gulf Harbour, Quay Park and big Auckland office blocks.

“I am a proud man and did not want to become bankrupt. I have not run away from my problems. I have dealt with almost every funder face to face over the last two years and with most of them we have resolved the issues,” Peters says.

But he could not resolve problems with funder Bank of Scotland International, nor repay $100 million in loans.

Peters is not alone.

Princes Wharf’s David Henderson of Kitchener Group has Inland Revenue lodging a bankruptcy application against him in the High Court at Auckland for $3.5 million.

Christchurch’s David Henderson – also a developer – has had three of his companies put into liquidation. Others are in receivership and the 31ha $1 billion Five Mile project at Frankton Flats outside Queenstown lies barren.

Mark Bryers, former Blue Chip boss, went bankrupt this month and to add to the misery of this sorry tale, two Blue Chip investors lost their High Court case last week.

Nigel McKenna of Melview Group has two companies in receivership, failed to proceed with Flat Bush in Auckland and has scaled back work.

Greenlane’s Neville Mahon has trouble at the Fiji Beach Resort & Spa managed by Hilton. Last month, his Denarau Investments and Denarau International went into receivership. Investors who own apartments there are working with receivers KordaMentha.

Patrick Fontein’s Kensington Park went to KordaMentha for a time, then rich industrial developer John Sax bought it. He plans to finish the Orewa housing project but in a scaled-back format.

Korean developer Dae Ju wanted to build a $450 million 67-level Elliott apartment tower almost up to the Sky Tower. It was planned to be ready before the 2011 Rugby World Cup.

Asked about progress, New Zealand representative and lawyer Marcus Beveridge this week responded: “No building yet, busy trying to get projects out of the ground.” READ MORE

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Boomers, defaulters and bad debts

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NZ Herald reports

Veda Advantage managing director John Roberts said he had warned a year ago that the “interest-free – two years to pay” type deals would create problems and it appeared that was now the case.

“The statistics show the lifestyles of the baby boomers are coming home to roost – they are defaulting on debts mounted up over the years which they can now no longer service.”

Roberts said many in the baby boomer generation had bought consumer goods on their mortgage and the defaults were likely to be a result of people losing their jobs.

He said that anecdotally he had also heard more baby boomers were affected by redundancies than those in the younger generations.

At the same time people had also seen their personal wealth shrink and those who had higher debt levels were now facing the possibility of having to consolidate debt.

“Their loan-to-value ratio might have been 80 per cent and is now 105 per cent.”

But not all baby boomers were feeling the pain of debt overloading. The baby boomer generation also had the highest increase in mortgage applications so far this year.

Overall applications were up 12.99 per cent but for baby boomers the increase was 18.56 per cent. Read more

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NZ Property developer bankrupted over $100 Million debts

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New Zealand Herald reports:

Influential property developer Jamie Peters is bankrupt.

The ex-NBR Rich List Aucklander, who is related to Winston Peters and says he has bought and sold real estate worth more than $1 billion, was declared bankrupt in the Auckland High Court after an application was filed by Marac Finance.

Marac was seeking $3 million in outstanding debt.

But yesterday, Peters said a $100 million debt brought him down.

Peters appeared on the Rich List in 2005 with $40 million and in 2006 with $45 million. His Starline Group was involved in large developments around Auckland’s CBD, in Wellington and on northern waterfront land.

“I am exposed to personal liability for debts in excess of $100 million as a direct function of the current global credit crisis which I simply do not have the ability to repay,” Peters said yesterday.

“This issue has similarly affected other individuals involved in development, as well as large organisations such as my primary funder Bank of Scotland International [BOSI].” Read more

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Farm NZ$200 million in debt

New Zealand’s largest family owned dairy business, Crafar Farms, has been put into receivership by its banks Westpac, Rabobank and PGG Wrightson Finance. Read more

The banks are owed around NZ$200 million and put KordaMentha partners Michael Stiassny and Brendon Gibson in as receivers early on Monday afternoon after Crafar Farms breached covenants on its loans.

The group owns 22 farms with 20,000 cows across the North Island’s Central Plateau, the Manawatu and the Waikato. Crafar Farms (CraFarms) has around 200 workers and is supplying tens of thousands of litres of milk each day to Fonterra.

CraFarms’ banks have been working for almost a week with the Ministry of Agriculture and Forestry, Federated Farmers and Fonterra to ease the Crafars out of their business. This follows multiple convictions for environmental lapses and animal neglect in recent years and the revelation last Monday from interest.co.nz of animal neglect on one of its large farms in the King Country near Benneydale.

Agriculture Minister David Carter ordered an inquiry into animal neglect into CraFarms last week and said the Crafar family, including its leader Allan Crafar, needed to be out of the industry. The revelations about animal neglect have shocked the dairy industry and raised questions about the sustainability of large herd dairying in the wake of the explosive debt-funded growth of the last decade Read more

Comsumer delinquencies on climb

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WASHINGTON – Continued job losses, shorter work weeks and falling incomes are being cited as major factors in another record rate of consumer delinquencies in the second quarter of 2009, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin. Delinquency rates hit record quarterly highs in three key loan categories: home equity loans, home equity lines of credit, and bank cards. The composite ratio, which tracks eight closed-end installment loan categories, also hit a record high at 3.35 percent of all accounts (seasonally adjusted) compared to 3.23 percent of all accounts in the previous quarter. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

ABA Chief Economist James Chessen said the high consumer credit delinquency rates represent the cumulative effect of the longest recession since the Great Depression.

“Six consecutive quarters of job losses have taken their toll,” Chessen said. “With jobs lost and work hours cut, it doesn’t take long for the financial pressure to become overwhelming. Falling behind on debt payments is an unfortunate side effect of high unemployment and a frozen job market. The picture won’t change until the labor market improves and the economy picks up steam. This is going to take time,” Chessen added.

Bank card delinquencies rose 26 basis points to a record 5.01 percent of all accounts. Record delinquency rates occurred in home equity loans – up 49 basis points to 4.01 percent of all accounts – and in home equity lines of credit – up three basis points to 1.92 percent of all accounts.

Auto loans, however, saw improvement. Direct auto loan delinquencies fell 55 basis points to 2.46 percent of all accounts and indirect auto loan delinquencies (arranged through auto dealers) dropped to 3.26 percent of all accounts from 3.42 percent in the previous quarter.

“The good news is that consumers are clearly being more cautious by saving more, spending less and making great efforts to repair their balance sheets,” Chessen said.

The second quarter composite ratio is made up of the following closed-end loans. All figures are seasonally adjusted based upon the number of accounts.

Increased Delinquencies:

Home equity loan delinquencies rose from 3.52 percent to 4.01 percent.
Marine loan delinquencies rose from 2.04 percent to 2.28 percent.
Personal loan delinquencies rose from 3.47 percent to 3.90 percent.
Property improvement loan delinquencies rose from 1.46 percent to 1.79 percent.
RV loan delinquencies rose from 1.52 percent to 1.72 percent.
Decreased Delinquencies:

Direct auto loan delinquencies fell from 3.01 percent to 2.46 percent.
Indirect auto loan delinquencies fell from 3.42 percent to 3.26 percent.
Mobile home loan delinquencies fell from 3.70 percent to 3.53 percent.

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Money and debt management update

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Orlando, FL — The Federal Reserve reported recently that consumers cut debt by a record $21.6 billion in July 2009, an indicator, in part, that Americans are becoming more aware of their personal finances and concerned about their long-term financial stability. The news prompted Etta Money, president of InCharge® Debt Solutions (IDS) to comment, “We hope the great news from the Fed will translate into a trend in which consumers commit more of their resources to paying off their debts and become more focused on money management.”

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Courts Slam NZ Property Developer

NZ Herald reports

Queenstown developer Rod Nielsen’s business practices should be restricted and he must bear responsibility for commercial irresponsibility, says the High Court.

After declaring him bankrupt over a $14.5 million debt owed to failed finance company Bridgecorp, Justice Paul Heath, in the High Court at Auckland, criticised Nielsen’s “speculative” business attitude, The Dominion Post reported.

Nielsen, who now lives in Las Vegas, originally borrowed $7.5m from Bridgecorp in 2005 to fund the Lake Esplanade development in Queenstown, which was never completed.

Nielsen operated a speculative business in good financial times but did not make adequate provision to deal with any adverse financial conditions, Justice Heath said.

“Property developers cannot do business on the basis that the market will always be buoyant. Mr Nielsen must take responsibility for being, at best, imprudent or, at worst, commercially irresponsible.”

Bridgecorp secured a judgment against the developer in mid-2008 for $13.7m owing but Justice Heath felt Nielsen had “made no real efforts to settle”. Read more

Debt Reduction and Debt Advice

NZ Blacklist www.nzblacklist.co.nz Online debt collection solutions

Every debt is different, circumstances behind it as are the debtors themselves. Before approaching an agency or NZ blacklist, have a look at the following advice and see if you can achieve collection without having to use a collection service.

PREPARE: Review the paperwork on the debtor before making the call. Know the history of the account, credit record, the promises kept/broken. Have all records in front of you, ready for reference.

ATTITUDE: Adopt a straight, professional business-like attitude. You have a contract, you delivered the goods, money is owed, and you have a right to expect payment. Never let it become personal. Don´t yell or raise your voice; and NEVER swear. Don´t threaten; legal action is your recourse.

CONTACT: Make sure you´re talking to the right person. Don´t let the individual brush you off with “You´ll have to talk to the bookkeeper.” Identify the person who will pay the bill. If you can´t get through after several calls, tell the secretary that you know your calls are being screened. Indicate the purpose of your call and if necessary give deadlines.

CONTROL: Control the conversation. Keep it focused on the debt and on the repayment schedule. Don´t let the customer sidetrack you with personal history, excuses, etc. Remember, the object of your call is to collect money, or get a commitment, not to become buddies with the customer or win arguments.

FLEXIBLE: Be ready to adjust to the situation. Think about the kind of customer you´re dealing with and adapt to meet the circumstances. Be prepared to accept a reasonable payment schedule, and a willingness to deal with a customer´s circumstances.

NOTES: Keep detailed, accurate notes of every contact with the customer. Probe for further information on the customer. Notes of these contacts will help you in subsequent phone calls, and may be invaluable in litigation. Good notes will also help in further credit decisions, or in cases where skip tracing may be needed.

PRODUCTIVE: Keep contact brief and to the point. This is a business call, not a social one. View your efforts on a ratio of time expended to results achieved. Long conversations probably mean the customer is stalling you, or trapping you in the buddy syndrome.

PRECISE: Never leave a contact open ended, such as “We´ll talk next week,” or “I´ll send what I can.” Every contact should result in a commitment to payment, of a specific amount, by a specific date, even the check number the customer is using to pay the pledge.

TIME: The longer an account is held, the less likely it is that it will be recovered. If payment or a payout is not arranged within 60 days, place the claim with NZ Blacklist or start legal proceedings.

PLACEMENT: Contact NZ Blacklist and start your road to successful debt collection

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Mafia Justice and Crocodiles

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ROME — Here’s another of the Mafia’s trademark offers-you-can’t-refuse, pay or be eaten by a crocodile.

Italy’s anti-Mafia police unit said Wednesday (local time), that it had seized a crocodile used by an alleged Naples mob boss to intimidate local businessmen from whom he demanded protection money.

Officers searching for weapons in the man’s home outside the southern Italian city last week found the crocodile living on his terrace, said police official Sergio Di Mauro.

The crocodile, weighing 40 kilograms and 1.7 metres long, was fed a diet of live rabbits and mice, Di Mauro said.

He said the suspect, an alleged boss in the Naples-based Camorra crime syndicate, used to invite extortion victims to his home and threaten to set the animal on them if they didn’t pay or grant him favours.

The man was not arrested but placed under investigation for illegal possession of an animal, Di Mauro said.

Investigators are also working on extortion charges against him.

Di Mauro said the animal is believed to be a caiman, a species that lives in Central and South America, and it is not yet clear how it got to Italy.

The crocodile was placed in the care of Italy’s forestry service.

- AP



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Debt and personal finances

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Orlando, FL — The Federal Reserve reported recently that consumers cut debt by a record $21.6 billion in July 2009, an indicator, in part, that Americans are becoming more aware of their personal finances and concerned about their long-term financial stability. The news prompted Etta Money, president of InCharge® Debt Solutions (IDS) to comment, “We hope the great news from the Fed will translate into a trend in which consumers commit more of their resources to paying off their debts and become more focused on money management.”

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Paying for debt collection advice?

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A recent stroy from the UK shows that people may be paying for debt advice which could possibly be available for free through outher sources. Please see our free links for debt advice on NZ Blacklist by clicking here.

Story:

People in debt are being charged for advice that they could be receiving for free, according to an industry insider.

Jessica Brown, a spokesperson from talkaboutdebt.co.uk, said that research by the company showed that up to 48 per cent of people in debt have paid money for advice on how to resolve their situation.

She described those in severe financial situations as a vulnerable group who needed to be given the right support and – considering their circumstances – it should be free of charge.

“We completely support any steps by the government to provide better protection for indebted consumers, with our recommendation being the implementation of an industry code of practice,” said Ms Brown.

Last week, the government published a consultation paper called Debt Management Schemes, which will review solutions for both creditors and debtors.

Ms Brown expressed her delight that central government has decided to look into the problem of firms charging people for debt advice.

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Comsumer debt on rise in UK

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Britain’s level of debt increased again the second quarter of this year, with almost double the level of borrowing compared to the first quarter of 2009.

Consumers borrowed £5.5 billion between April and June, nearly twice as much as the £2.9 billion borrowed between January and March, said financial advice site unbiased.co.uk.

Savings levels grew to £21 billion in the second quarter, up from a record low of £14 billion in the first three months of the year.

Despite the rise in saving, the amount represents a 70% fall compared to saving levels in the year ago period.

Unbiased.co.uk said the drop in savings is due to an increase in the number of people choosing to pay off personal debt rather than save.

“After the topsy-turvy behaviour of financial markets and a deluge of contradictory reports on the economy in the media, it is not surprising that many consumers may feel uncertain about their financial standing,” said David Elms, unbiased.co.uk chief executive.

He added that the UK risks “heading down the debt path again” unless consumers rein in their addiction to credit.

“However, it is encouraging to see that Brits are beginning to save again, despite the low interest rate environment,” he concluded

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Money News .co.uk reports complications with personal debts on the rise

Personal debt problems have become more complicated in the past few years because of changes in income and people having mortgage arrears, says a debt expert.

Frances Walker, spokesperson for the Consumer Credit Counselling Service (CCCS), said that it is encouraging see that people are starting to pay off their debts, but in some cases it can be very hard to find a solution.

She pointed out that around 30 per cent of the people that come to the CCCS for advice on how to deal with their debt will end up having to find a way to make more money, plain and simple, but this is tricky with the level of unemployment at the moment.

“Also people’s debt problems are more complicated now than they were a few years ago because they often have mortgage arrears and have experienced a drop in income,” she added.

Ms Walker made her comments following the release of figures by the Citizens Advice Bureau, which show that there has been a 99 per cent increase in the number of enquiries about jobseekers allowance since this time last year.

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Bankruptcy or Settlement?

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(MADISON, Wis.)—A recent analysis found the number of Americans filing for bankruptcy continues to rise. The Association of Settlement Companies (TASC) today reminds consumers who are struggling to pay off their unsecured debt that debt settlement remains a reliable tool for relief, especially when compared to taking the dramatic step of filing for bankruptcy.

According to a report from Automated Access to Court Electronic Records, bankruptcy filings in the United States now exceed 6,000 per day. Reputable debt settlement companies such as those that are a part of TASC—a non-profit watchdog for the industry—can help consumers avoid being a part of that statistic. One reason is that debt settlement companies can often negotiate with creditors to settle for less than the full amount owed.

“Every day the debt settlement industry assists consumers in navigating through their financial straits,” Chris Kesterson, president of TASC, said. “Our staff members are knowledgeable and experienced in working with creditors, who are willing to take a settlement over getting nothing with bankruptcy.”

Debt settlement provides consumers with a three-year plan to get out of debt without the 10-year stain of bankruptcy on their credit report. Bankruptcy also is time-intensive and can be difficult to apply for, if a consumer even qualifies, Kesterson added.

To illustrate debt settlement as a growing choice over bankruptcy, TASC revealed recently that the industry returned more than $2.2 billion in consumer debt last year. In addition, TASC’s research shows more than $500 million in settlement funds saved by consumers are available to credit card companies today.

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Path of Debt

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Consumers are beginning to borrow again which means they are ending up down the debt path again, according to Unbiased.co.uk.

David Elms, chief executive of the comparison website, made his comments following news that people borrowed nearly double in the second quarter of 2009 than they did in the first quarter.

He pointed out that 2008 saw many people repaying much of their debt because of the financial turmoil that went on, but that this trend has not continued.

“The first half of 2009, in contrast, has seen consumers head back down the debt path as they shift back into borrowing,” said Mr Elms.

In the same report it also showed that savings levels have increased from £14 billion to £21 billion in the same period.

Industry commentator Chris Tapp recently claimed that the price of debt has gone up, because people are finding it harder to get work in order to clear credit cards and loans.

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Economic Recovery?

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SYDNEY – The Reserve Bank of Australia (RBA) believes it is “too soon” to be certain that the global economy is on the road to recovery, the central bank’s latest board minutes show.

The RBA left the cash rate unchanged at three per cent for the fifth straight meeting on September 1, as board members pondered whether a raft of local and overseas data presented over the previous month was confirmation of an economic recovery.

“Members concluded on balance that the global economy was most likely on a sustained, if modest, recovery path, though it was still too soon to be confident of this assessment,” the minutes said.

The minutes, published today, repeated comments from the August board meeting saying that if the improved prospects for economic growth were realised, the central bank would at some stage lift the cash rate from its current 49-year low.

“At the previous meeting, members had agreed that if the economy continued to evolve as in the latest forecasts, the Bank would in due course need to adopt a less expansionary policy stance,” the minutes said.

The information at this meeting suggested that economic conditions were indeed evolving broadly in that way.

“Nonetheless, some uncertainty remained about the outlook both abroad and at home.”
The minutes said information presented to board members at the meeting “showed that the situation in the global economy was continuing to improve”.

Gross domestic product (GDP) in the Asian region had been much stronger than elsewhere, while there were some “upside surprises” in countries such as Germany and France, the minutes said. Read more

Debt being paid of in record time!

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Inside Arm reports ;

U.S. consumers are paying off debt at a record pace as the recession lingers. In the past 11 months, nearly $70 billion has been erased from credit card balances, a trend that the ARM industry may need to watch.

Credit card debt outstanding in the United States has fallen by nearly $70 billion in less than a year and continues its downward spiral, according to a government report released yesterday.
The Federal Reserve said Tuesday that consumer credit outstanding in the U.S. declined by $21.5 billion in July, the largest monthly drop on record. The annualized rate of decline, 10.4 percent, was also the largest on record.


The Fed, in its monthly G.19 report on consumer debt, said that revolving debt – mostly credit cards – fell at an 8 percent annual rate in July, or by $6.1 billion. July marked the 11th straight month of declines in credit card debt.

In those 11 months, consumers have shed nearly $70 billion off credit card balances. Banks have also had a hand in the decline, tightening credit lines for their customers.


The trend is one that the accounts receivable management industry, particularly credit card collectors, will need to monitor, according to Mark Russell, director at ARM industry advisory firm Kaulkin Ginsberg.


“ARM companies that specialize in credit cards have been swamped with work this year,” Russell noted. “But if credit card debt continues to contract, there may be fewer accounts to work down the road.”


Collection agencies said that they had more work in the second quarter of 2009 in insideARM’s latest Quarterly Credit & Debt Collection Industry Confidence Survey. Of the collection agencies that said they specialized in financial services work (which includes credit cards), 63.4 percent reported an increase in account placements in the second quarter, up slightly from the 63 percent that answered the same way in the first quarter. But those numbers were significantly higher than the 53 percent that saw an increase in account placements in the second quarter of 2008.

In July, non-revolving debt – like that found in auto, student and personal loans – paced overall declines in consumer credit outstanding. The Fed said that non-revolving debt contracted by $15.4 billion, or at an annual rate of 11.7 percent. The G.19 report does not cover real estate loans.

The decline in non-revolving debt for July will likely prove to be an anomaly, as consumers probably held back on auto purchases for most of the month until the government’s “Cash for Clunkers” program was launched on July 24. As such, the Fed’s non-revolving debt in August is expected to show a significant increase. Student loans also began to roll out in earnest in August.

Taken overall, July’s drop was unexpected and far exceeded economists’ predictions. Economists had forecast consumer credit would drop $4 billion in July, according to the median of 31 estimates in a Bloomberg News survey. Projections ranged from declines of $12 billion to no change from the previous month.

Total consumer debt outstanding in the U.S., excluding real estate loans, stood at $2.472 trillion at the end of July, down from its all-time high of $2.581 trillion at the end of July 2008.

Successfu small debt collection system in USA

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For companies with subscription or annuity-based business models, low balance collections have traditionally occupied the lowest position on the accounts payable totem pole.

That is, until now.

With the credit crisis driving companies to improve cash flow and revenues, Nashville, Tenn.-based Sitel Corp., a global Business Process Outsourcing (BPO) leader, recently demonstrated an innovative new service that substantially reduces small balance collection costs while increasing low balance collections overall.

The year-long demonstration at one of Sitel’s largest retail clients focused on collecting an average outstanding customer balance of only $33.07. Upon completion, the client cut average collection costs per customer by nearly 50 percent and increased the company’s annual collections by nearly $7 million.

“In this economy cash is king, and small balance collections in the $25 to $200 range represent a huge opportunity for retailers and other annuity-based companies,” says John Farinacci, COO of Sitel’s Accounts Receivable Division. “High balance collection is a very agent rich environment. But you can’t afford agents or a third party for small balances. You need a more affordable and effective way to collect, and that’s exactly what we’ve developed.”

New approach

Sitel’s Low Balance Collection Solution targets retail, financial services, utilities, communications, and media and entertainment companies with subscription, periodic payments, and/or repetitive payment business models.

By blending its global collections expertise with advanced interactive voice response (IVR) technologies, the service replaces the traditional series of small balance mailings — letters, post cards or email — with more affordable and effective interactive voice messaging. The solution provides a consistent, non-threatening customer care experience that allows the client to retain important customers while collecting a greater number of low balance payments early in the process.

“Studies have shown that most customers are comfortable with automated interactions,” Farinacci says. “That’s important because these are ongoing customer relationships and customer retention is obviously huge to a retailer. With this solution, we keep the customer experience high by allowing them to interact in a non-pressured environment.”

After providing a friendly reminder that a balance is due, the IVR technology allows the customer to pay all or part of the balance immediately, either through a touch-tone phone, connecting to a live agent, or the company Web site.

“Letters, post cards, email or SMS are fine for a basic notification, but IVR allows you to collect during the interaction and early in the collection process,” Farinacci explains. “The call might inform the customer that a bill has been sent and they have 20 days to pay it, or it might call attention that a balance is due or beyond due, or that a product hasn’t been returned. All they have to do is push a couple of buttons to pay the balance, opt out to an agent, or promise to pay on-line.”

Lower costs, improved collections

The demonstration project, which took place in 2008-2009, involved a large consumer facing organization with literally millions of subscription-based customers. Collection notification, agent interaction and balance delinquency costs were all significantly reduced, while cash flow and revenues got a lift.

First, Sitel transitioned the company away from its traditional post card and passive interactive voice strategy to the more effective automated, hosted and managed IVR system. That alone decreased the cost and number of transactions and saved the client roughly $400,000.

“Companies traditionally send their letters or post cards at specific intervals, but candidly, that is not very effective. At 5 to 8 cents a minute, the IVR call is not only more productive, but very inexpensive in comparison to a static post card, which translates to 35 to 45 cents per item, probably more,” Farinacci explains. “For the demonstration, we sent a letter at the outset, and then followed up with a series of IVR calls. We can make five calls at an average cost of 30 cents, while five mailings cost on average roughly $1.75.”

At the same time the solution generated some $2.9 million in additional collections, increasing the client’s overall liquidation rate by 4 percent. Since the IVR calls were so much more effective in generating early payments, the solution also decreased the number delinquencies that ended up in third party collection, with approximately $1.3 million in savings. Finally, the solution decreased the client’s roll rate by 3 percent as well as its days sales outstanding (DSO) and delinquency rates, resulting in a $2.1 million improvement in bad debt.

In summary, the company reduced its annual collection costs by $1.7 million and increased cash flow by $5 million, resulting in an overall return on investment of 8.5 percent, or $6.7 million.

With the current economic environment both creating an increase in low balance delinquencies and making it difficult (if not impossible) for companies to tap the capital markets, this new approach offers subscription or annuity-based businesses a viable way to boost cash flow and revenues.

“The small balance market has always been neglected because the balance threshold does not work under traditional methods,” Farinacci concludes. “This solution helps a company collect, collect early and collect effectively.”

Debt Busting Tips

NZ Blacklist www.nzblacklist.co.nz

The newspapers are telling us mortgagee sales are happening in record numbers, and there is no doubt some are finding the going tough. The problem is usually a familiar one – too much debt and too little savings. For many people who want to live with the jingle of coins in their pocket and no or low debt, choosing to live off the smell of an oily rag is the answer!

For those struggling under the weight of a mortgage here are some debt-busting oily rag tips : Read more

Online debt collection

A new service very similar to NZ Blacklist www.nzblacklist.com has taken the US by storm. Report as follows from PR Web:

All too often, small businesses find themselves with bad debt and little they can do about it. Due to the complicated nature of hiring a collection agency, many companies ignore their bad debt. Most of the problem is a lack of unbiased information to aid in finding a compatible or reputable collection agency. Forced to throw caution to the wind, companies blindly place their trust in whichever collection agency has the most convincing sales pitch. In the end, a lower percentage of bad debt is collected than if a best-fit collection agency had been selected.

CollectionTree.com changes all of this. Finally, someone is here to provide businesses access to a directory of collection agencies and enables them to make smart, effective decisions. CollectionTree.com starts by sharing agency ratings based on consumer responses and historical data so each business gets the strongest collection agency for their industry and amount of bad debt placed. After uploading their accounts to the CollectionTree.com secure portal, businesses can monitor the entire process from the easy-to-understand user interface and can also quickly communicate online with their collection agencies. What’s more, with every submitted account, CollectionTree.com generates a forecast to project how much collected money to expect.

This new online tool is created with the business owner in mind. CollectionTree.com removes the confusion and overwhelming attention associated with processing bad debt; at last, companies can get bad debt collected with confidence. Read more here

NZ Blacklist superior debt collection solutions

Debt Collection, Debt Collectors, Bad Debt Recovery, Terms of Trade, Credit Reporting, Legal Services, Skip Tracing, Tracing and Investigative Services

Collection House profits down

Blacklist your debt with NZ Blacklist Superior debt collection solutions.

Reports from Australia show increasingly tough times for debt collection agencies. Report from Sydney Morning Herald-

Debt collector Collection House has posted a fall in annual net profit after exceptional items but says it is well positioned and looking forward with confidence.
The company’s net profit was $7.85 million for the year ended June 30, down 37 per cent on the prior financial year’s $12.39 million after impacts from the disposal of non-core businesses.

However, Collection House announced a rise in revenue from continuing businesses, a four per cent lift in underlying pre-tax profit to $10.5 million for the 12 months to 30 June 2009 and an increase in its final dividend.

It’s shares closed up 5.5 cents at 54 cents, a rise of 11.34 per cent, after the better than expected result.

Chief executive Tony Aveling said a range of initiatives implemented in response to the global financial crisis led to positive outcomes for the company and it was “looking forward with confidence”.

“When the crisis hit we recognised we needed to change tack,” Mr Aveling said.
To read full article, click here

Debt Collection, Debt Collectors, Bad Debt Recovery, Terms of Trade, Credit Reporting, Legal Services, Skip Tracing, Tracing and Investigative Services

Collectors report more business, but tougher time getting paid

NZ Blacklist Debt Collection Solutions.

Reports from the U.S show debt collection has rise in business. Press Democrat report;

Debt collection is a growth industry these days, but that doesn't mean it's a terribly profitable one.

As more people fall behind on their credit card bills and car payments, collection agencies are busier than ever, churning out warning letters, calling people's homes or businesses and even dragging them into court.

But collecting on those mounting debts is tougher than ever. High unemployment and plunging home equity have left debtors with fewer resources -- and some say less inclination -- to repay debts and repair their credit ratings.

"I work four times as hard to collect the same amount of money as I did two years ago," said Robert Tavelli, head of the Santa Rosa-based collection firm NCCS Inc. "We're seeing probably a 300 percent increase in listings with no greater increase in recoveries."

No one's going to shed a tear to hear debt collectors are having a tougher time shaking down people who are behind on their bills. Some might even cheer.
But the inability to collect outstanding bills is a serious problem for businesses, and one that could threaten a sustained economic recovery. The more bad checks or delinquent accounts a business can't recover, the greater the pressure to cut employees, who in turn might fall behind on their own bills, creating a vicious cycle.

"Many of my clients are suffering," Tavelli said. "They've had to lay off people because they can't collect their receivables."

When it becomes a choice between sending customers or patients to collections and keeping employees, businesses are increasingly choosing collections, said Chris Schumacher, president of Optio Solutions, a collection firm based in Rohnert Park.
When business was good, companies focused on growth. Now that it's gotten tougher, many are watching in horror as the bad debts on their books mount, leaving them little choice but to take a tougher approach to collect past-due bills. Read full article by clicking here

US Debt Collection agencies report significant layoffs

New Zealand Blacklist Superior Debt RecoverySolutions

Reports out fo the US show significant layoffs in Q2, 2009.

Collection agencies and debt buyers reported layoffs at a record pace in the second quarter, according to the results from insideARM’s latest Credit & Debt Collection Industry Confidence Survey. But collection performance is improving from late last year

Accounts receivable management companies reported a record level of layoffs in the second quarter of 2009, according to the latest insideARM Credit & Debt Collection Industry Confidence Survey.

In the previous Confidence Survey, 25.7 percent of collection agencies reported layoffs in the first quarter with 33.3 percent of debt buyers cutting positions.

ARM companies did report better levels of performance in the second quarter. Although performance ratings were lower than in the first quarter, they significantly outpaced the performance reported in the fourth quarter of 2008, when the economy was seemingly in freefall and panic was the order of the day.

Read the whole article by clicking here

New Zealand Blacklist. Contact us today for your superior debt collection solutions.

http://www.nzblacklist.com/ ; www.nzblacklist.co.nz

Debt Collection, Debt Collectors, Bad Debt Recovery, Terms of Trade, Credit Reporting, Legal Services, Skip Tracing, Tracing and Investigative Services

Time is money, and its time to collect bad debts

New Zealand Blacklist Debt Collection Solutions www.nzblacklist.co.nz

Every business should be able to initiate payment themselves without the need for 3rd party collection agencies. A brief guide on how to collect debts yourself may help.

REVIEW: Review the documentation on the debts before calling the debtors. Know the history of the debt, account details, credit record, and any promises kept or broken by the debtor. Have all records or documents in front of you, ready for reference.

APPROACH: Adopt a straight, professional business-like approach. You should have Terms of Trade or have a contract, you have delivered the goods and possibly have a signed proof delivery receipt, your money is owed, and you have a right to expect payment. Don´t yell or raise your voice when speaking with the debtor. Don´t threaten them in any way; Using debt collectors or legal action is your recourse.

CONTACT: Make sure you´re talking to the correct person. Don´t let the debtor brush you off with "You´ll have to talk to the accountant." Identify the person who will pay your bill. If you can´t get through after several calls, tell the receptionist that you know your calls are being screened and that this is not acceptable. Indicate the purpose of your call and if necessary give deadlines for paying the outstanding invoice.

CONTROL: Drive the conversation. Focus only on the debt and on the repayment schedule. Don´t let the debtor sidetrack you with excuses, etc. Remember, the object of your call is to collect money, or get a commitment.

FLEXIBITY: The current economic environment is difficult. Be ready to adjust to the situation. Think about the kind of client you´re dealing with and adapt to meet the circumstances. Be prepared to accept a reasonable payment schedule. Work out what you want or what would be an acceptable payment schedule before you call. Do not go into negotiations without knowing what your willing to concede beforehand. NOTES: Keep detailed, accurate notes of every contact with the customer. Probe for further information on the customer. Notes of these contacts will help you in subsequent phone calls, and may be invaluable in litigation. Good notes will also help in further credit decisions, or in cases where skip tracing may be needed.

CONFIRMATION: Never let the debtor put you off with such terms as "We´ll talk next week," or "I´ll send what I can." Every contact should result in a commitment to payment, of a specific amount, by a specific date.

TIME: The longer an account is held, the less likely it is that it will be recovered. If payment or a payout is not arranged within 90 days, place the debt with New Zealand Blacklist.

Just as every company is specialist in their field, finding a specialist debt collection agency that fits your needs will expedite your debt being paid off. NZ Blacklist has been helping companies and individuals find the right agency to collect debt and we are confident that we can help you.

Our online systems support users to efficiently pursue delinquent accounts or bad debts anywhere in New Zealand.

List your debts for free on NZ Blacklist and take charge of your financial future

New Zealand Blacklist
www.nzblacklist.com www.nzblacklist.co.nz
Bad Debts are Bad Business