Bad debts up 500 per cent as easy credit bites

The credit crunch has hit home for thousands of New Zealanders as debt collection agencies report up to a 500 per cent increase in workload over the past few months.

Debt collectors who have been in the industry for more than 15 years say they have never been busier, with small-time borrowers and businesses “across the board” defaulting on loans and payment for services.

Meanwhile, budgeting advisory services are swamped with people needing help as debts spiral out of control. One service says its waiting time to see new clients is up to five weeks.

Graeme Byers, owner of debt collector Guardian Credit Services, told the Herald on Sunday his business had increased by between 400 and 500 per cent this year.

“There’s just more debt out there. Poorer people are getting hammered.”

Byers said the collapse of numerous finance companies had put many people into positions where they could not pay everyday debts. “One feeds off the other. It snowballs,” he said.

Mary Will from Final Call said she had never been busier. She estimated her business had expanded by 200 per cent in the past six months and she was having to turn down jobs.

She was working mainly for tradespeople such as earth movers, builders and carpet layers who hadn’t been paid by developers. The sums varied “from $2000 to $20,000”.

“The collapse of Bridgecorp was the beginning,” said Will. “Some developers are going under, others are very slow to pay bills. Some of the big developers are really struggling. A lot of it is at the top end. People who used to spend a lot of money just aren’t.”

She said she was getting calls from clients she hadn’t heard from in two years.

“All of them are saying they will have a lot more work for me in the future. When there is a downturn that’s when business gets good.”

Simon Freeman, from Auckland District Collections, said it was “without a doubt” the busiest time in the industry for 15 years.

He said he had 500-700 active collection jobs on his books, which ranged from domestic debts of $1000 to a case last week which involved $1.2 million.

“We are extremely busy. It’s companies supplying restaurants, trucking firms, plumbing firms, everything.”

Freeman said much of his work came from the property industry where developers had come unstuck and failed to pay suppliers and tradespeople.

“It’s the poor old painter, the finisher, the landscaper, the concreter.”

He said the worst of the credit crunch was yet to come and predicted he would be just as busy for the next five years.

Bill Crossan, from Gold Credit Service, has been in the debt collecting business for 17 years and said he’d never been busier. He dealt mainly with bills owed to professionals like lawyers and accountants. “They’re all saying people are just not paying them. Everyone is trying to tighten up and not pay bills.”

The issue is also affecting people at the other end of the economic spectrum, who are defaulting on everything from car payments to credit cards.

Gerry Walker, head of the Salvation Army’s Auckland division, said he was not surprised to hear of the boom in debt collection.

“Unfortunately it’s one of the negative byproducts of the tightening economy. As budgets get tight and people put things on HP, they can slip behind on repayments and, sooner or later, the debt collectors come knocking,” he said.

Walker said cars were the most common item people owed money on.

He said poor people, particularly immigrants, were intimidated by some debt collectors.

“Some operators out there are not as scrupulous as others. They will use whatever tactics they can. Some people are really scared.”

Sunday May 25, 2008
By Cliff Taylor

Source: The New Zealand Herald

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