Debt collectors going feral
October 28th 2008 00:41
Karen Madden is at the end of her tether. Debt collectors have her totally terrified of answering the telephone and she is currently fighting in court to save her home from being taken away from her.
Why? Because two years ago while she was dealing with a close family member who had been taken very ill, she fell behind with her repayments on a credit card debt of $4,000.
The bank then sold her debt to a collection agency that consumer groups describe as “notorious” for their intimadatory tactics.
Despite making more than $2000 of repayments since then, the collection agency is pursuing her in court for the whole amount outstanding or they will enforce bankruptcy onto her, allowing them to make a claim on her home.
“The debt collection agency purchased the debt from the bank and now they have gone to court to make me bankrupt,” says Karen, a sales rep from Mont Morency.
“When they found out I was paying off a property, their attitude totally changed.
“They didn’t want to talk about repayment plans, they just wanted the whole amount outstanding immediately or they would take my house they said.”
“But there is no way I can pay the whole amount all at once, I have been sending off $500 when and where I can, but that’s not good enough for them.”
When Karen’s case went to court last week, the debt collection agency refused to admit that Karen had made more than $2,000 worth of repayment on the debt. In fact they now claimed she owed $6,000 because they had added in their own fees and charges.
Karen’s debt counselor, Donna Elliot, says the debt collectors had probably bought the debt for less than $1,000.
“Karen’s case is totally outrageous and these people are really aggressive, says Elliot, “Its one thing to collect debts but not harass people, make threats and demand immediate repayment in full.”
Karen says the debt collectors were rude aggressive and persistent.
“It got to the point where I didn’t want to answer the phone, they were rude and threatening and said things like, ‘we can take your home you know, we can take you to court you know.”
Ironically, Karen would like to refinance her mortgage to repay all of her outstanding debts but is now prevented from doing so because she is in court facing bankruptcy.
“I honestly don’t know where to go or what to do now,” says Karen “I have got my mortgage up to date now and if only I could refinance that I could get myself out of trouble.”
All or nothing
Brian King of Wangaratta lost his job and fell behind on his repayments. Being a responsible person he telephoned the debt collection agency several times to negotiate a repayment plan for his $6,700 credit card debt, but the debt collectors refused to negotiate and insisted it would only accept repayment of the full debt.
However he is now on NewStart allowance and in no position to make a lump sum repayment of the entire amount
.
“Mr Kingt did the right thing by trying to negotiate to repay the debt he owed in amounts he could
afford,” says Gerard Brody, Deputy Director - Policy & Campaigns at the Consumer Action Law Centre.
“He even visited a financial counsellor who tried to negotiate on his behalf, but the debt collector just ignored the financial counsellor’s attempts to contact it and continued to press Mr Knight directly for full repayment of the debt, telephoning and writing to him over 20 times.
“The debt collection agency now has the nerve to claim that Mr Knight has not responsed to its letters of demand.”
Mr Brody said Mr Kingt had been forced to launch legal proceedings in the Victorian Civil and
Administrative Tribunal (VCAT) for an order that the debt collector accept a repayment arrangement on the grounds of Mr Knight’s genuine financial hardship.
Going to VCAT is an option that many people don’t know about says Gerard Brody.
“These debt collectors rely on the fact that most people don’t know their rights.
“We only see a small fraction of the total number of people who are being harassed and pursued by these notorious debt collection agencies.”
Brody says that the bank has a responsibility to help their customers in financial difficulty, not send their debts off to bullying debt collectors.
“The bank has a legal obligation under the Code of Banking Practice to assist customers in financial
difficulties. It should not be able to duck this obligation by selling off debt and failing to take responsibility for the conduct of the debt collector.”
Debt collectors must operate within guidelines laid down and monitored by the Australian Securities and Investment Commission (ASIC). A debt collector must offer and accept a repayment plan for the debt they are chasing and are not allowed to demand repayment in full if the debtor is willing to participate in a repayment plan.
Debt collectors are also not allowed to harass and intimidate debtors with repeated telephone calls and letters threatening court action.
Consumer Action has made several complaints to the government regulators responsible for regulating debt collection conduct, the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission, about the treatment of debtors by the more notorious debt collectors
Mr King reports that he was threatened with forced bankruptcy and the sending in of the sheriff if he did not repay the full amount of the debt at once. That is outside the guidelines for debt collection and Consumer Action hopes that ASIC may take action.
Melbourne- the debt capital of Australia
The thousands of dollars on offer from the federal government for families looks likely to be eaten up by the extreme debt loads now being carried by average Victorian households.
The number of consumers getting into trouble with unsecured debts is rising strongly with debt agreement administrators reporting that average debt loads are also rising.
The federal government bankruptcy agency, the Insolvency Trustee Service of Australia, reported last week that the number of part nine debt agreements entered into during the three months to the end of September rose 7.94 per cent compared to the June quarter to 2202 nationally.
The number of consumers with consumer debt loads above the $80,000 limit for part nine agreements is rising as well, forcing them into part ten personal insolvency agreements.
Off a low base, part ten personal insolvency agreements are up 138 per cent compared to last year’s September quarter figures and 8.74 per cent compared to the June quarter.
Melbourne’s outer suburbs, particularly the outer eastern suburbs, continue to feel the brunt of Australia’s consumer debt crisis. There were 71 part ten agreements entered into in Victoria during the quarter, up from 15 during the same period last year.
“The consumer debt problem is spreading inwards from Cranbourne, Narre Warren and the far outer east to the middle income, middle suburbs,” says debt agreement administrator John Beecroft.
“And the debts are getting bigger, I think we are in for a horror Christmas and new year period for insolvency activity.
“And it is not just the battling families getting into trouble, this nis well and truly affecting middle class families now as well.
“Adding to the problem, quite frankly is the toughening up of the attitude of creditors. They are using the ‘all monies’ rules pretty ruthlessly and being pretty quick to take action.”
The “all monies” rule is usually buried deep in the terms and conditions of credit cards and personal loan contracts that consumers sign with banks. The rule allows the bank or lender to take any money the consumer holds in other bank accounts if they default on repayments.
Why? Because two years ago while she was dealing with a close family member who had been taken very ill, she fell behind with her repayments on a credit card debt of $4,000.
The bank then sold her debt to a collection agency that consumer groups describe as “notorious” for their intimadatory tactics.
Despite making more than $2000 of repayments since then, the collection agency is pursuing her in court for the whole amount outstanding or they will enforce bankruptcy onto her, allowing them to make a claim on her home.
“When they found out I was paying off a property, their attitude totally changed.
“They didn’t want to talk about repayment plans, they just wanted the whole amount outstanding immediately or they would take my house they said.”
“But there is no way I can pay the whole amount all at once, I have been sending off $500 when and where I can, but that’s not good enough for them.”
When Karen’s case went to court last week, the debt collection agency refused to admit that Karen had made more than $2,000 worth of repayment on the debt. In fact they now claimed she owed $6,000 because they had added in their own fees and charges.
Karen’s debt counselor, Donna Elliot, says the debt collectors had probably bought the debt for less than $1,000.
“Karen’s case is totally outrageous and these people are really aggressive, says Elliot, “Its one thing to collect debts but not harass people, make threats and demand immediate repayment in full.”
“It got to the point where I didn’t want to answer the phone, they were rude and threatening and said things like, ‘we can take your home you know, we can take you to court you know.”
Ironically, Karen would like to refinance her mortgage to repay all of her outstanding debts but is now prevented from doing so because she is in court facing bankruptcy.
“I honestly don’t know where to go or what to do now,” says Karen “I have got my mortgage up to date now and if only I could refinance that I could get myself out of trouble.”
All or nothing
Brian King of Wangaratta lost his job and fell behind on his repayments. Being a responsible person he telephoned the debt collection agency several times to negotiate a repayment plan for his $6,700 credit card debt, but the debt collectors refused to negotiate and insisted it would only accept repayment of the full debt.
However he is now on NewStart allowance and in no position to make a lump sum repayment of the entire amount
.
“Mr Kingt did the right thing by trying to negotiate to repay the debt he owed in amounts he could
afford,” says Gerard Brody, Deputy Director - Policy & Campaigns at the Consumer Action Law Centre.
“He even visited a financial counsellor who tried to negotiate on his behalf, but the debt collector just ignored the financial counsellor’s attempts to contact it and continued to press Mr Knight directly for full repayment of the debt, telephoning and writing to him over 20 times.
“The debt collection agency now has the nerve to claim that Mr Knight has not responsed to its letters of demand.”
Mr Brody said Mr Kingt had been forced to launch legal proceedings in the Victorian Civil and
Administrative Tribunal (VCAT) for an order that the debt collector accept a repayment arrangement on the grounds of Mr Knight’s genuine financial hardship.
Going to VCAT is an option that many people don’t know about says Gerard Brody.
“These debt collectors rely on the fact that most people don’t know their rights.
“We only see a small fraction of the total number of people who are being harassed and pursued by these notorious debt collection agencies.”
Brody says that the bank has a responsibility to help their customers in financial difficulty, not send their debts off to bullying debt collectors.
“The bank has a legal obligation under the Code of Banking Practice to assist customers in financial
difficulties. It should not be able to duck this obligation by selling off debt and failing to take responsibility for the conduct of the debt collector.”
Debt collectors must operate within guidelines laid down and monitored by the Australian Securities and Investment Commission (ASIC). A debt collector must offer and accept a repayment plan for the debt they are chasing and are not allowed to demand repayment in full if the debtor is willing to participate in a repayment plan.
Debt collectors are also not allowed to harass and intimidate debtors with repeated telephone calls and letters threatening court action.
Consumer Action has made several complaints to the government regulators responsible for regulating debt collection conduct, the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission, about the treatment of debtors by the more notorious debt collectors
Mr King reports that he was threatened with forced bankruptcy and the sending in of the sheriff if he did not repay the full amount of the debt at once. That is outside the guidelines for debt collection and Consumer Action hopes that ASIC may take action.
Melbourne- the debt capital of Australia
The thousands of dollars on offer from the federal government for families looks likely to be eaten up by the extreme debt loads now being carried by average Victorian households.
The number of consumers getting into trouble with unsecured debts is rising strongly with debt agreement administrators reporting that average debt loads are also rising.
The federal government bankruptcy agency, the Insolvency Trustee Service of Australia, reported last week that the number of part nine debt agreements entered into during the three months to the end of September rose 7.94 per cent compared to the June quarter to 2202 nationally.
The number of consumers with consumer debt loads above the $80,000 limit for part nine agreements is rising as well, forcing them into part ten personal insolvency agreements.
Off a low base, part ten personal insolvency agreements are up 138 per cent compared to last year’s September quarter figures and 8.74 per cent compared to the June quarter.
Melbourne’s outer suburbs, particularly the outer eastern suburbs, continue to feel the brunt of Australia’s consumer debt crisis. There were 71 part ten agreements entered into in Victoria during the quarter, up from 15 during the same period last year.
“The consumer debt problem is spreading inwards from Cranbourne, Narre Warren and the far outer east to the middle income, middle suburbs,” says debt agreement administrator John Beecroft.
“And the debts are getting bigger, I think we are in for a horror Christmas and new year period for insolvency activity.
“And it is not just the battling families getting into trouble, this nis well and truly affecting middle class families now as well.
“Adding to the problem, quite frankly is the toughening up of the attitude of creditors. They are using the ‘all monies’ rules pretty ruthlessly and being pretty quick to take action.”
The “all monies” rule is usually buried deep in the terms and conditions of credit cards and personal loan contracts that consumers sign with banks. The rule allows the bank or lender to take any money the consumer holds in other bank accounts if they default on repayments.
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