Aug 30

Rumors of a blowout in small business tax debts rated a mention in The Australian today. According to the story reported in the newspaper the tax obligations of small and medium sized businesses were at $8 million levels.

The ATO did not confirm the newspaper’s report and provided them with the annual data on taxation statistics available since October 2009.

As at June 2009, the amount of collectable debt at $12.2 billion at June 2009. The ATO’s stock of “debt holdings” mid last year was double the amount of collectable debt, at $24.5 billion. This figure includes obligations in dispute by insolvent businesses and bankrupt individuals.

In its 2009 annual report the ATO said that tax debts owed by business and households have grown by 12 per cent in the year to June 2009. “Collectable debt” had increased by only one per cent in 2008.

Aug 19

According to today’s reports in the Herald Sun, ANZ has admitted it’s fault in approving finance to a pensioner which was outside of his means and have consequently decided to forgive his debt.

In line with the reformed lending policies under the new consumer credit protection laws, the bank has agreed to wipe a pensioner’s $18,600 credit card debt.

Alec Stubbs, 72, was offered an astonishing $46,000 credit card limit through ANZ, despite only receiving around $400 a week in pension payments.

According to the daily, ANZ spokesman Stephen Ries the credit limit was provided in error, nonetheless the banks takes responsibility for it’s mistakes.

“It’s clear this customer’s credit limit should not have been increased to this extent, and due to the exceptional circumstances we have decided to clear this debt to ensure the family is not placed under any additional stress at this time,” Mr Ries told the daily.

“However, we encourage any customers that find themselves in financial hardship to contact us early so we can help them work their way through the situation.”

Mr Stubbs had a total debt of $36,000 and an available credit limit of $70,000, through ANZ and CBA credit facilities, among others

CBA spokesman Steve Batten told the Herald Sun that they had stopped making unsolicited finance offers to welfare recipients in 2007, and those who requested extra credit had to pass a financial test.

Aug 16

Labor have announced proposed banking policy changes to ban pre-approved increases to credit card limits by mid 2012.

The new National Credit Legislation which was introduced in July 2010 already covers both pre-approved credit card limits and uninvited credit card offers received in the mail.

With the current proposal made by Labor, banks would struggle with promotion of pre-approved increases in credit without the prior agreement of customers.

ALP would also like to introduce other rules to prevent banks from allowing customers to borrow in excess of their credit limit which automatically charges them penalty fees.

Banks will be required to develop a common method for calculating interest due on credit cards and to apply repayments in a consistent manner. Rules will require that credit card companies apply monies paid to the credit card by the card holder to the most expensive debt first.

While the ALP have developed a website promoting their proposed “Fairer Simpler Banking” policy, the policy does not address any issues other than aspects of credit card product design and practice.

Aug 10

Mortgage Brokers who are not involved in helping clients out with debt management structuring and solutions are missing out on a potential source of revenue.

According to a recent poll, most brokers decide not to get involved in client debt management, with 60% of the respondents choosing not to provide comprehensive debt position advise.

Just 37.5 per cent said it was their responsibility while 2.5 per cent of respondents said they were unsure.

Obviously brokers have a responsibility to ensure borrowers aren’t entering into something they can’t afford but given that most mortgage brokers are not licensed to provide financial advise, many are concerned about the legal obligations attached to ‘perceived financial advise’.

Doug Mathlin of FrontRunner Consulting Group said he was surprised by the number of brokers not wishing to advise clients on their overall debt.

Aug 10
If you see bankruptcy as the easy way out of a messy debt position – think again.

Today personal bankruptcies and insolvencies are at record levels, affecting three times as many Australians as 20 years ago.

While for some bankruptcy is the only plausible solution in all cases it should be viewed as a last resort, rather than an easy fix.

Before declaring bankruptcy it is important to understand what other debt solution options are available to you. We at www.debtconsolidationaustralia.com.au offer just such options.
You may be able to negotiate your debts down and refinance your debts into a mortgage. Perhaps you will find that an informal debt agreement can assist. Then there is the option of a part 9 agreement. These options need to be explained to you by a professional not just in terms of what you will need to pay under each, but also what obligations and limitations you take on by making a choice to proceed with one of these options.

Firstly you should be making a decision of how to solve your debt problems and not your creditors.

Some more aggressive debt collection almost force bankruptcy on to people. That is not to say that putting your head in the sand and ignoring your debts is the answer.

From September creditors will be able to commence bankruptcy proceedings for amounts above $5,000. Even if the debt is lower, costs and interest can take it over the threshold.

Following the issue of a Bankruptcy Notice, a debtor has 21 days to pay or come to an alternative arrangement. When there is no agreement, a Creditor’s Petition can be brought before the Federal Court seeking to make the debtor bankrupt.

It’s an expensive process compared to the free route taken by most people who declare voluntary bankruptcy with the official receiver at the Insolvency and Trustee Service Australia (ITSA).

Excessive use of credit is a great contributor to the debts problems experienced by middle-class Aussies.While bankruptcy can be  the best option for people with the least to lose – those on low incomes with no savings or assets – and no realistic prospect of paying back debts. If you have an good income and some assets there may be opther options worth pursuing.Bankrupts can’t work in a range of occupations, from police officers to real estate agents. A trustee controls your affairs. Bankrupts can not borrow money, go overseas or hold directorships in companies.

A bankruptcy will result in the trustee selling  just about everything you own apart from “reasonable household goods” and some items of sentimental value – like your wedding ring.

You do get to keep a car worth up to $6,500, tools of the trade up to $3,500, your superannuation and any life insurance policies.

But your earnings will be severely restricted. The trustee takes one in every two dollars you bring in above a “base income threshold”.

Consider too your ability to access finance down the track. Bankruptcy remains on a credit rating for seven years, but the listing on the publicly accessible National Personal Insolvency Index is permanent.

In some cases, informal alternatives are appropriate – from consolidating debts into a single loan to home lenders agreeing to a “mortgage holiday”.

Aug 6

A new survey conducted by think tank, the Australian Institute, identified behavior by the Australian banks of pro-active, uninvited marketing to customers of loans and credit cards, irrespective of the consumer’s ability to repay the debt while continually boosting their own profits to be irresponsible.

Persons interviewed complained of receiving ongoing offers from their mortgage providers to refinance and gain access to further debt.  These offers were unsolicited.

Over the same period, two out of three respondents reported receiving an unsolicited offer for a new credit card, one in two had received an unsolicited offer to increase their credit-card limit, and one in three had received an offer for a personal loan, according to the survey.

Many of the respondents to this survey were not working at the time of receiving these offers and could not afford the debt.

Most banks pursue profit at any cost even while demonstrating irresponsible actions. Bank employees in Australia are often paid commissions to sell their bank’s products. Consumers can no longer be confident that the advice they receive from bank workers is objective and suits their circumstances.”

The institute’s recommendations included legislation to ensure that interest rates charged by banks move in line with changes to the Reserve Bank cash rate, while being advertised as a mark-up over the official rate. Restrictions on sales targets and commissions for bank workers, banning pre-approvals of credit card offers or credit extensions, and a set of national laws to ensure the responsible provision of credit to consumers is also on the Australia Institute’s agenda.

Aug 5

Despite a drop in US bankruptcies during the previous quarter, 137,698 personal bankruptcies were filed by Americans during June 2010.

This is a clear indication that many Americans are still struggling under the fall out of the GFC.

As available credit sources dissipate people who require access to credit to continue meeting their financial obligations have no other option but to declare insolvency.

Bankruptcy filings in July 2010 were also up 9 per cent compared with the same month a year ago, and 2010 is on pace to record the largest number of consumer-bankruptcy filings in five years.

Filings topped 1.4 million last year, the most since Congress revamped bankruptcy laws in 2005 to make it more difficult for consumers to shed debt.

So far this year there have been nearly 908,000 personal-bankruptcy filings, representing roughly one in every 125 US households. At this point last year there were about 802,000 filings.

The increase in personal filings has cast doubt on whether the 2005 bankruptcy-law change has been effective. Filings declined drastically in 2006 but resumed their increase in following years.

Aug 4

A new Australian survey confirms that consecutive interest rate hikes have had the effect of mortgage holders reducing levels of spending on non-essential items.

Almost one in two Australians with a home loan have had to be more careful with their spending as a result of escalating mortgage costs. This is felt throughout the economy with many retailers reporting drops in sales revenue over the past several months.

The Australian  National Retailers Association (ANRA) and American Express survey found 24% of respondents with a mortgage had delayed purchases of large items costing over $500 during the period, while a further 24% had only made purchases if they were on sale.

Almost a third of the 1000 survey participants had said interest rate increases were a deterrent to  buying decisions on major items during the past six months.

Aug 2

It seems that Australians are finally choosing saving over spending.  Information provided by Veda Advantage suggest that people are avoiding credit cards like the plague, instead concentrating on saving money.

In fact, consumer credit demand has not returned to pre-global financial crisis levels, and credit card and personal loan applications for the June quarter were flat compared with the same period last year.

Veda statistics also point to a significant drop in quarterly mortgage demand – a drop of 20% as compared to this time last year.

Media concentration on doom and gloom in the world, worries of further interest rate increases as well as tighter lending rules would all account for this drop.

After the impact of the GFC consumers are far more careful with debt, opting to pay out credit cards first before considering any other loans.

This trend is also supported with data from other sources such as the RBA.

Demand for new cars has not tapered off as did demand for mortgages. According to data from Dun & Bradstreet, 23 per cent of Australian households expect to apply for new credit in the next three months, and 13 per cent plan to apply for a rise in their credit limit. The average card balance rose almost $15 to $3248.60 from April to May.

Last week’s lower-than-expected inflation data suggests that RBA is unlikely to raise rates in it’s meeting tomorrow.