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| Debt agencies thrive as card bills go unpaid |
| 08/08/2002 |
| The debt collection industry is booming because of excessive credit
card use and businesses being “totally irresponsible? about whom they give
credit to, the managing director of a New Zealand credit control company
told the New Zealand Herald. East Coast Credit Control's John Harrison says people who did not pay their bills created a flow-on effect, which was seriously affecting those who were owed money. The company, which has 18 branches in NZ and Australia, has been operating for 14 years. About 10 years ago there were only a handful of debt collection services. Now businesses are springing up all over the country. The increase in personal debt is not unique to Australia and New Zealand, but a worldwide phenomenon. Intrum Justitia, Europe's largest debt management firm, says it opened more than 500,000 new debtors' accounts in the first quarter of 2002, compared with 372,000 at the same time last year. The figures also confirm that Christmas and summer holidays have a great impact on levels of consumer spending and debt. Last year, Intrum saw new accounts, whereby consumers have missed payments, increase by approximately 30 per cent due to summer holidays and 15 per cent due to Christmas. “There is quite clearly an increase in business flowing to [us],? says Jim Burton, chief executive of Intrum Justitia's UK arm. “The average increase in balances proves people are borrowing more. When trouble hits, it is always harder to get back on track with a much greater burden of debt being carried in the first place.? New Zealand firm Global Credit Management owner Michael Tresch says his was one of many new businesses that saw a gap in the market. “The bottom line is, credit is so easy.? Times had changed from when people used to save for things they wanted, Tresch says. “Today people want things now. People accept that borrowing is a part of life. My parents wouldn't have dreamed of paying off a car. That was something they would save for.? Banks were keen to “push? credit cards on people because they earned the banks money in interest when payments were missed. How to cut your debt If you're on of the many in the grip of debt, here are some tips to follow: Don't ignore your debts: it leads to much bigger trouble in the long run. Make sure you always take the time to understand exactly what your debt position is. If you're not sure, call the company and ask. Seek advice: go to your local Citizens Advice Bureau for advice. These people are well trained and can help to renegotiate payments to your creditors. Cut your outgoings: do your cashflow budget again. Knock 5 per cent off anything you can reduce. Then try 10 per cent. Cut up your credit cards and pay cash for everything. Prioritise debts: you must pay your mortgage, rent or rates or risk losing your home or imprisonment. Similarly you have to pay your utility bills or risk being without light, heating and water. Unsecured debts are marginally less important ? though you risk going on a credit card blacklist. Be realistic: contact your debtors, explain the position and make them an offer of payment. Or go through the CAB. Don't make unrealistic offers you can't keep. Stick to your payment schedule: lenders are happier with a small payment, which you stick to, rather than with unrealistic promises. They get angry if you fail to meet your part of the deal. Stop saving money: cash in the bank or in an investment will probably earn less interest than you are paying on your debt. Redirect that cash flow. One important exception is with any investment scheme, such as home-related endowment policies or essential insurance, where halting contributions might lead to a policy being voided or heavy penalties being applied. |
