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Rise in bankruptcies brings warning

Rise in bankruptcies brings warning from country’s largest credit agency
15 Dec 2008 – There has been a sharp increase in the number of people filing for bankruptcy and the recently introduced alternative, the No Asset Procedure, in 2008, according to Veda Advantage, the country’s largest credit information provider.

In total, 4751 individuals have filed for either bankruptcy or No Asset Procedures (NAPs) this year, a 25% increase on 2007, when there were 3949 applications for bankruptcy.

Veda Advantage Country Director John Roberts says, “While bankruptcy is a drastic measure, it should be remembered that there are often mitigating circumstances beyond the individual’s control. Given the state of the economy, and the trends we have also witnessed with default rises this year, it is no surprise that there has been such a marked increase in the number of people who have filed for bankruptcy or NAP.”

The NAP, introduced in December 2007, has more lenient terms and fewer restrictions than bankruptcy. However there is still a considerable impact to a consumer’s credit-worthiness.

John Roberts says of the credit reporting code, “The credit reporting system needs to be more focused on rehabilitation than persecution, which is why we advocate a move to a comprehensive credit reporting regime. While adverse information like a bankruptcy remains on your credit file for 7 years and a NAP for 5 years, you would at least be able to show a full payment history for any credit you have taken out, which is not possible under the current regime.”

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Veda Advantage’s credit bureau has also revealed that credit applications for the month of November, traditionally a busy time for lenders in the lead-up to Christmas, are down 26% on 2007, and are the lowest applications have been in 6 years. Alongside this, the average amount of a default loaded on the Bureau has almost doubled when compared to this time last year – further evidence of New Zealanders’ financial struggles.

John Roberts says, “Consumers are obviously exercising a little more caution this year. While the Government has taken measures to try and kick-start spending over the festive period with the cuts to the cash rate, the figures from our Bureau do not bode well for the retail sector.”

ENDS


About Veda Advantage – www.vedaadvantage.com
Veda Advantage facilitates credit reference checks for New Zealand’s major banks and lenders, and underpins the ability of consumers to exercise choice in relation to consumer credit products. Veda Advantage holds files on around 97.5% of the individual credit-active population and 100% of the commercial credit-active population in New Zealand.

You can apply for a copy of your credit file at www.mycreditfile.co.nz or by calling 0800 692
733.

A $23 express delivery service fee is payable if the file is needed urgently, or otherwise the file will be available within 10 working days.

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