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Debt at highest levels since 2002

Debt at highest levels since 2002

On average, New Zealanders’ debt defaults have increased around 50 percent versus 2002 and Kiwis are taking significantly longer to pay back the money.

Latest figures compiled by debt collection agency Baycorp reveal debt referred to the company for collection has increased markedly since mid-2007 but the cash actually collected is on the decline.

There has also been a marked increase in commercial referrals to collection agencies the company says.

The figures show the average debt placed for collection by Baycorp is now $814 whereas in 2006 it was $544, an increase of 49 per cent.

The biggest amount is owed to finance companies whose average unpaid debt is around $4,400, up from $3,100 four years ago.

Baycorp CEO Geoff Harper says New Zealanders’ willingness to pay off debt is unchanged, it’s simply their ability to pay that has changed.

“People are more likely to seek a payment arrangement now rather than paying their debt in full,” Mr Harper says. “And the average payment has dropped by a quarter so they are paying less and taking longer to repay.

“Debtors are also not as, shall we say, diligent in keeping their word. It used to be that almost half of those who owed money would keep to their promise to pay but now that figure is less than 40 per cent,” he says.

Mr Harper stresses the figures are for his company only but are probably indicative of the situation faced by creditors and the collections industry in general.

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The age group with the highest ‘case value’ – the amount sought by Baycorp for collection – is for those people aged between 46 and 55 whose average debt is now $900, up from $686 (32 per cent) since 2005.

The average debt for people younger than 25 is $568, a 22 per cent increase in the same period. The age group with the highest increase is the 55 to 65 year olds whose average debt has grown 35 per cent.

In addition to the finance industry, Baycorp’s big customers by industry include banks & finance companies, crown entities, power companies and medical service suppliers.

There has also been a particularly strong demand for commercial collections and summary judgements have increased some 200 per cent this year alone, Mr Harper says.

“It would seem businesses need to be stronger and more proactive in their credit policies to get their own money in so they in turn can pay their debtors.”

Technology is playing an increasingly important role in tracking debtors and gaining commitments from them and lowering the cost of collections Mr Harper says.

New computer-based dialler technology at Baycorp has in some instances had the effect of increasing promises to pay by 36 percent and a 25 percent increase in cash collected.

The computer-based caller is capable of leaving messages on answer phones and sending text messages and works weekends and nights, lowering the cost of collections.

ENDS

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