National Australia Bank and GE Money are among a group of financial institutions that have agreed to participate in a bulk debt negotiation being run by Legal Aid and a group of financial counselling services.
The project allows financial counsellors to identify client cases where debts should be waived and present them to creditors in a package. The aim is to establish some efficiency in the negotiation process and arrive at more standardised outcomes.
The other participants are Baycorp, Credit Corp, Accounts Control Management Services, Telstra and AGL.
The bulk negotiation concept was developed by Denis Nelthorpe, a solicitor with the West Heidelberg Community Legal Service.
Nelthorpe organised a trial in Victoria last year that involved 400 client files being sent to a group of financial institutions, including NAB and GE. Debts were waived in 90 per cent of cases, amounting to a total of A$3.75 million.
Speaking at Financial Counselling Australia’s annual conference, held in Sydney yesterday, Nelthorpe said: “These were 400 of the poorest people in Australia. What we are trying to do is fast-track the handling of cases involving the very poor. So far, the financial institutions have co-operated.”
This year, the project is going national. Legal Aid will handle applications from financial counsellors, who have until July to get client files registered (using the website www.bulkdebt.org, though this site is still in development). Eligible clients must be in debt to one of the participating creditors; they must be receiving Centrelink income payments, and they must have no other income or assets.
Nelthorpe said the project group aimed to have another collection of files for negotiation by the end of the year and would aim to include more financial institutions in that round.
Financial counsellors at the conference talked about clients who would never be able to repay their debts but who were rung up on a regular basis by debt collectors asking them to make payments. Negotiations to secure waivers could last for months and there was little consistency in the handling of negotiations from case to case.
Case workers said there were problems getting creditors to accept that Centrelink payments were protected.
Nelthorpe said there was almost no recognition by financial institutions that people who could not make repayments often suffered from drug addiction or mental illness, or lived in violent domestic situations.
National Australia Bank’s head of collection operations, David Berry, said the alignment of financial difficulty and mental illness was a big surprise to the bank when this emerged in last year’s pilot program.
Berry said: “This is a journey for us. It has pushed us to understand our social responsibility. You may not notice the difference for a year or two, but we are foregoing a lot of debt already.
“We may not agree to everything that gets put on the list, but we like the way it works. The package approach is efficient.”