Digital Finance Analytics (DFA) Blog – Page 1041

A Guide To Dealing With Debt Collectors

The Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) have launched Dealing with debt collectors: Your rights and responsibilities a free guide that helps consumers in trouble with debt understand their options so they know how to deal with collectors and creditors.

The consumer guide explains:

People’s legal rights and responsibilities if they owe a debt;
Where to seek help to work out a budget, negotiate a repayment plan, apply for hardship or better understand their financial and legal options;
What to do if a debt collector contacts them;
What sort of behaviour by debt collectors is not acceptable;
How to dispute an alleged debt or its amount; and
What to do if they are being taken to court.

Dealing with debt collectors also summarises how and when debt collectors can contact someone and provides examples of inappropriate behaviour by debt collectors.

‘If consumers are having problems repaying their debts, it’s important to take action without delay. This free guide explains the options available to consumers to help them cope with the situation and hopefully get back on track’, said ASIC Deputy Chairman Peter Kell.

‘The ACCC and ASIC encourage consumer advocacy groups and financial counsellors to refer consumers to the booklet to help them understand their legal rights and responsibilities if they owe a debt’, added Mr Kell.

ACCC Deputy Chair Delia Rickard said: ‘It is important for consumers to be aware of their rights when dealing with debt collectors and to know how to complain.

The ACCC and ASIC continue to receive complaints about the behaviour of some debt collectors and creditors. Consumers should expect to be treated professionally and in a manner that complies with Commonwealth consumer protection laws.

‘Where creditors or collectors disregard consumer protection laws and the rights of consumers, we will consider appropriate enforcement action against them’, added Ms Rickard.

Dealing with debt collectors: Your rights and responsibilities can be downloadedfrom ASIC’s MoneySmart or from the ACCC’s website.

Background information

In November 2013, the ACCC prosecuted a company ‘Excite Mobile Pty Ltd’, for engaging in false, misleading and unconscionable telemarketing practices, and using undue coercion in relation to debt collection. The Federal Court ordered the company to pay a penalty of $455,000 and the company’s two directors were ordered to pay penalties totaling $95,000 between them (refer to 266/13 MR).

In 2011, ASIC commenced proceedings in the Federal Court of Australia against one of Australia’s largest debt collection companies. In 2012, the Court found ACM Group Limited had harassed and coerced debtors and engaged in ‘widespread’ and ‘systemic’ misleading and deceptive conduct when recovering money (refer: 12-261 MR).

In July 2014,the ACCC and ASIC updated their industry guidance Debt collection guideline for creditors and collectors to reflect significant changes to the law, such as the introduction of the Australian Consumer Law in 2011 and changes to privacy laws in Australia. This industry guidance provides information and case studies for creditors and debt collectors about:

When it is appropriate to contact a debtor, including what constitutes contact and reasonable contact hours, methods or frequency of contact
How the need for collection activity will be greatly reduced when debtors act promptly and responsibly, and collectors are flexible, fair and realistic
New communication technologies developed since the initial publication, including the use of social media platforms and auto dialers, and the potential pitfalls to avoid in using such technologies; and
Key considerations when resolving debtor complaints and disputes.

Regulatory guide 96 Debt collection guideline: For collectors and creditors (RG 96)

ASIC’s MoneySmart website

ASIC’s MoneySmart website at moneysmart.gov.au has comprehensive and impartial information and tools for consumers about all aspects of personal finance, including managing loans and credit.

Debt collection industry research

The ACCC is also undertaking a research project into the debt collection industry to examine a number of concerns about debt collection practices.

The research is intended to inform the ACCC’s understanding of how the industry operates, in particular, the business models adopted in the industry and the influence this may have on activities that take place when collecting debts from consumers. The findings from the research will inform future initiatives designed to address the problems or issues identified.

It is expected that a research report will be issued in mid-2015.

Property Investors Latest Attitudes – DFA Survey

Continuing our series on the latest DFA survey results, today we look at the investment sector. We start by looking at the barriers which Investors believe may influence their investment decisions. Whilst the impact of budgets changes are off the agenda now, there is a growing concern about upcoming regulatory changes and how they may impact the investment market. In contrast the RBA warnings appear to have lost their immediate focus. Investors are less concerned about potential interest rate rises now and a greater proportion have already bought. High prices are having an impact, but it appears obtaining funding is not an issue for most. We found that, unlike first time buyers, investors were easily able to find appropriate properties to purchase, and gain finance.

Looking at solo investors in particular, they are driven by tax efficiency, and expectation of appreciating property values. They see net returns from property a better bet than deposits.

The picture for portfolio investors is somewhat similar. They are move motivated by the hope of appreciating values than solo investors and the tax advantages of leveraged property investment.

Those investors considering investing in property via a SMSF wrapper, are clearly driven by tax strategies and the expectation of rising property values.

We see these SMSF investors are getting their advice from a number of sources, mortgage brokers, and internet sites have the greatest impact, and we noted a rise in advice from real estate agents as an influence. (In this survey, investors could score multiple advice sources).

Finally, we asked about the property distribution within a SMSF, and the greatest proportion is between 20 and 40 per cent of the portfolio.

Local P2P On The Up

SocietyOne, Australia’s first and largest Peer-to-Peer (P2P) lender has announced the successful completion of a Series B capital raise with a consortium of eminent Australian investors, made up of Consolidated Press Holdings (CPH), News Corp Australia and Australian Capital Equity. The consortium will acquire 25 per cent of the business initially.

Matt Symons, Chief Executive Officer and co-founder with Greg Symons of SocietyOne said: “This investment marks a new and exciting chapter for SocietyOne and for the acceleration of P2P Lending in Australia. We are thrilled to partner with investors of this calibre with their unparalleled track record for building successful businesses in Australia and overseas”.

Regarded by some as the future of banking, P2P lending or marketplace lending as it is also known, is growing rapidly worldwide with considerable success in markets such as the United States and Europe. Investors have been particularly excited by the significantly increased returns from removing the intermediary from the lending markets. The largest P2P lender in the US, Lending Club, is now originating over USD$1 billion in personal loans per quarter and is expected to launch its much-anticipated public offering before year-end. The listing will create a global benchmark for the new industry.

Speaking on behalf of the consortium of CPH, News Corp Australia and Australian Capital Equity, Mr James Packer said: “We have seen first-hand the power of technology in reshaping the media industry and I am excited about the potential of technology, led by the team at SocietyOne, to help reshape the financial services industry in Australia. We see enormous potential in delivering significant savings to borrowers as well as providing new innovative products that will also be attractive to the investor market. Peer-to-Peer lending is one of the global forces leading the transformation of banking by putting people, not intermediaries, at the centre of the borrowing and lending experience.”

The Westpac Group-backed venture capital fund Reinventure has also agreed to participate in the latest capital raising following its initial investment in February 2014 as part of an earlier $8.5m raising.

“We continue to be impressed by the growth of the model and the execution of this team. This new round of investment brings together the best group of strategic investors in the country,” said Simon Cant, Co-founder and Managing Director of Reinventure. “This is consistent with our approach of backing experienced entrepreneurs, proven models and driving value to ensure they win their market.”

SocietyOne uses a risk-based pricing approach and its proprietary ClearMatch technology platform to offer creditworthy borrowers a better deal and investors direct access to an attractive new fixed income investment option. Borrowers with good credit histories benefit from personalised rates that are generally much lower than standard credit cards and up to 5% lower than personal loans from the major banks.

First Time Buyer Barriers By State

After I posted the results from the DFA household survey yesterday, I was asked by a number of readers if I could provide a state by state breakdown of the barriers. As the survey runs by post code, it was feasible to do this, and today I post the state results from the latest analysis.

To recap, first time buyers in the DFA survey are those who are actively seeking to acquire a property for the first time. Once they have obtained a property and settled in, they then migrate into one of our other property owning segments. You can read about our segmentation here.

Turning to the results, we see that the price barrier is highest in NSW and WA, and lowest in QLD. It is also more difficult to find a place to buy in NSW and WA, whereas the barriers in SA are lower. We also see fear of unemployment is the most significant barrier in TAS and QLD, and is lowest in WA and NSW. We also found that first time buyers in WA were most concerned about the risk in interest rate rises.

Finally, to reassure readers, at any one time DFA has 26,000 households in the survey, so the sample size is large enough to be statistically relevant. It is also worth noting the relative distribution of FTB in the ABS data, although they define first time buyers differently, namely those who have transacted for the first time, not those looking to buy, as we do.

Super Needs To Get It’s House In Order – ASIC

In a speech today by Greg Medcraft, Chairman, Australian Securities and Investments Commission “ASIC explained: Who is the corporate watchdog, what does it do and why should Australians care?” at the National Press Club of Australia, he was critical of the super industry:

Around 14 million Australians have a super account. Generally, super doesn’t have a guaranteed outcome – which is why you should be interested in your super. And one day, each and every one of you will retire. Super is often invested in equity and debt capital markets and the funds management sector – all of which are regulated by ASIC. And, with super growing, our regulatory perimeter is increasing. In fact, as of the middle of this year, Australia had super assets of $1.85 trillion, with Treasury estimating that by 2030 this will increase to $5.1 trillion. Ladies and gentlemen, my point is this – we matter to Australians because of superannuation. We matter because most Australians have a lot of skin in the game. And that is the game ASIC is in.

Super generally doesn’t guarantee an outcome. Because of this, Australian investors need to have trust and confidence in financial advice. In fact, Australian investors deserve to have trust and confidence in financial advice. I have long been passionate about lifting trust and confidence in this sector. Only one in five Australians get financial advice. With recent high – profile cases of advisers mis-selling financial products, this is sadly no surprise. The industry needs to get its house in order.

P2P Goes Main Street

Peer To Peer Lending is going main stream as San Francisco-based Lending Club, the biggest p2p lender in the world with more than $6.2bn worth of loans made through its platform (this is three times the amount of its closest rival, Prosper) seeks to raise at least $650m by IPO at $10 to $12 per share. This would translate into a mid value at about $4bn for the company.

Trading for more than eight years now, Lending Club’s business model is based on using advanced computer algorithms to match those seeking money with those willing to provide it. High-quality credit customers, with FICO scores starting at about 660, can borrow up to $35,000 at interest rates averaging 14 percent. The IPO roadshow is targeting the big end of town, including the investment arms of some of the very banks which might find their lunch being eaten.

Setting the right price is of course a problem as it is the first cab off the rank, but if successful, it would mark an important step in the evolution of P2P, and competitors like Prosper Marketplace and the small business specialist On Deck Capital, could follow suite.

At a time when the traditional banks are finding it hard to lend to some small borrowers, thanks to capital pressure, and legacy infrastructure, P2P may look an attractive alternative to borrowers and investors a like. Whilst the company began with personal loans, targeting borrowers looking to refinance credit card debt with high interest rates, it has moved into other offerings. Small businesses can now borrow up to $100,000 through the platform and recently, the lending platform unveiled a new two-year “super prime” loan enabling customers to borrow up to $10,000.

Lending Club already has the backing of some of the biggest names on Wall Street and in Silicon Valley. Its board includes Lawrence H. Summers, the former Treasury secretary; John J. Mack, the former chief executive of Morgan Stanley; and Mary Meeker, the venture capitalist and onetime star Internet analyst. Its existing investors range from Google, the venture capital firm Kleiner Perkins Caufield & Byers and the mutual fund giants T. Rowe Price and Black Rock. According to the prospectus, only three of the company’s existing investors plan to sell in the initial offering. Lending Club will list on the New York Stock Exchange.

According to the FT:

The p2p sector’s growing partnership with Wall Street has been a sensitive topic for the industry, with some keen to downplay the role of professional investors in their growth. Lending Club recently changed the way it hands out data on its platform as it seeks to level the playing field between professional and retail investors.

Prosper and Lending Club have also installed electronic “speed bumps” in an attempt to stop sophisticated investors from snapping up the most attractive loans.

GDP 0.3% In Sept Quarter

The ABS published their data to September 2014 in the National Accounts. GDP, in seasonally adjusted chain volume terms, grew 0.3 per cent in the September quarter 2014. This number is significantly below analysts’ expectations which was in the order of 0.7 per cent in the quarter and also is a drop from the relatively weak 0.5% growth recorded in June.This translates to 2.7 per cent for the 12 months to September 2014.

Net exports contributed 0.8 percentage points to GDP growth. Household final consumption expenditure contributed 0.3 percentage points to GDP growth and Government final consumption expenditure contributed 0.1 percentage points to GDP growth. This was offset by a -0.7 percentage point contribution to GDP growth from total Gross fixed capital formation and a -0.1 percentage point contribution from Changes in inventories.

The Terms of trade decreased 3.5%, and Real gross domestic income decreased 0.4%. In seasonally adjusted terms, the main contributors to the increase in expenditure on GDP were Net exports (0.8 percentage points) and Final consumption expenditure (0.4 percentage points) The main detractors were Private gross fixed capital formation (-0.5 percentage points) and Public gross fixed capital formation (-0.2 percentage points).

In seasonally adjusted terms, the main contributor to GDP growth was Financial and insurance services (0.2 percentage points), with Mining and Information media and telecommunications each contributing 0.1 percentage points to the increase in GDP. The main detractors to growth in GDP were Construction (-0.2 percentage points) and Professional, scientific and technical services (-0.2 percentage points).

The AU – US rate dropped below 84c on the news.

RBA Rate Unchanged

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.

Growth in the global economy is continuing at a moderate pace. China’s growth has generally been in line with policymakers’ objectives. While weakening property markets present a challenge in the near term, economic policies have been responding in a way that should support growth. The US economy continues to strengthen, but the euro area and Japan have both seen weakness recently. Some key commodity prices have declined significantly in recent months, reflecting somewhat softer demand and, more importantly, increased supply.

Global financial conditions remain very accommodative and long-term interest rates and risk spreads remain very low. Differences in monetary policies across the large jurisdictions are affecting markets, particularly exchange rates.

In Australia, most data are consistent with moderate growth in the economy. Resources sector investment spending is starting to decline significantly, while some other areas of private demand are seeing expansion, at varying rates. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend for the next several quarters.

Inflation is running between 2 and 3 per cent, as expected, with recent data confirming subdued rises in labour costs. Although some forward indicators of employment have been firming this year, the unemployment rate has edged higher. The labour market has a degree of spare capacity and it will probably be some time yet before unemployment declines consistently. Hence, growth in wages is expected to remain relatively modest over the period ahead, which should keep inflation consistent with the target even with lower levels of the exchange rate.

Monetary policy remains accommodative. Interest rates are very low and have continued to edge lower over the past year or so as competition to lend has increased. Investors continue to look for higher returns in response to low rates on safe instruments. Credit growth is moderate overall, but with a further pick-up in recent months in lending to investors in housing assets. Dwelling prices have continued to rise.

The exchange rate has traded at lower levels recently, in large part reflecting the strengthening US dollar. But the Australian dollar remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices in recent months. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.

Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.

In the Board’s judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.