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

Sunday Star Times

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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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