Credit Management in Australia - December 2019 by AICM

Volume 27, No 2 December 2019

The Publication for Credit and Financial Professionals

IN AUSTRALIA

Congratulations ASHLEIGH MASON

our

2019 Young Credit Professional l SME sector turns to non-bank lending l Keep up with changes to the National Credit Code l Collection and vulnerability strategies

Contents Volume 27, Number 2 – December 2019

Message From the President

68 NSW: Theresa Brown, David Lee, Trent Harwood, Cameron Chee, Shamik Paul (all Optus) and Ceyda Sert (Atradius).

Credit Management

New credit laws need to be strengthened By Nick Pilavidis

2019 year in review By Mike Laing

SME sector turns to non-bank lending as business owners voice concerns about property security, loan rejection and cash flow

By Peter Langham

Transform your accounts receivable process to word class using best practice

Qld: Sonny Nair (Mitsubishi), Jean-Marc Nemorin (Credit Clear) and Justin Watson (Credit Solutions).

By Terry Eames

Australian SMEs struggle in conditions likened to the global financial crisis

By Patrick Coghlan

Consumer Credit Keeping up with the National Credit Code – what’s new?

By Andrea Beatty and Chelsea Payne

Optimising originations: The challenges, priorities and moving forward

74 Vic/Tas: Frank Gambera (McMahon Fearnley Lawyers), Stuart Musgrave (Equifax) and Dylan Smith (Rubix).

By Poli Konstantinidis

Collection and vulnerability strategies; Better outcomes for your customers, your staff and your organisation

Jodie Bedoya, Anna Brooks, Rosemarie Price and Nikki Dennis

Predatory loans – A buzz-phrase or a valid concern for Aussie battlers? By Clare Venema

Ripple effect of the new Banking Code of Practice to Debt Collectors

10 Mike Laing

Peter Langham

14 Terry Eames

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

WA/NT: Enthralled wine night attendees listen to our presenter Angus Heida discuss the wine pairing with food.

By Georgina Wu

32 Clare Venema

79 SA: James Devonish (Oakbridge Lawyers).

Georgina Wu

Nicki Hutley

42 Andrew Spring

ISSN 2207-6549

44 Robert Naudi

Economic Update 2020 economic outlook – low and slow

By Nicki Hutley

Leadership & High Performance Credit professionals under pressure

By Robyn Erskine, Jeff Hurst, Eva Tsahuridu and Tim Timchur

Insolvency Overview: AICM conference insolvency debate 2019

By Andrew Spring

Plugging loopholes

49 51 52 56 60 62 64

New Members

68 71 74 77 79 80

Credit Marketplace

Victoria/Tasmania Western Australia/Northern Territory South Australia

Nick Pilavidis FICM CCE Level 3, Suite 303, 1-9 Chandos Street, St Leonards NSW 2065 PO Box 64, St Leonards NSW 1590 Tel: (02) 8317 5085, Fax: (02) 9906 5686 Email: nick@aicm.com.au

Nick Pilavidis FICM CCE | Email: nick@aicm.com.au

NSW – Chris Lagana MICM Qld – Carly Rae MICM SA – Lisa Anderson MICM CCE WA/NT – Jeremy Coote MICM Vic/Tas – Michelle Carruthers MICM EDITOR/ADVERTISING Andrew Le Marchant LICM CCE Phone Direct 02 8317 5052 or Mob 0418 250 504 Email: andrew@aicm.com.au EDITING and PRODUCTION Anthea Vandertouw | Ferncliff Productions Tel: 0408 290 440 | Email: ferncliff1@bigpond.com

Around the States Queensland

CHIEF EXECUTIVE OFFICER

CONTRIBUTING EDITORS

2019 National Conference

New South Wales

Trevor Goodwin LICM CCE – Australian President Julie McNamara MICM CCE – Queensland and Australian VP Lou Caldararo LICM CCE – Victoria/Tasmania Rowan McClarty MICM CCE – Western Australia/Northern Territory Gail Crowder MICM – South Australia Peter Morgan MICM CCE – New South Wales Debbie Leo MICM – Consumer

PUBLISHER

By Robert Naudi RITP, CA, MICM

Introduction CCE Conference Dinner Exhibitor booths Credit Team of the Year Young Credit Professional of the Year Faces in the Crowd

DIRECTORS

THE EDITOR reserves the right to alter or omit any article or advertisement submitted and requires idemnity from the advertisers and contributors against damages or liabilities that may arise from material published. CREDIT MANAGEMENT IN AUSTRALIA is published by the Australian Institute of Credit Management, Level 3, Suite 303, 1-9 Chandos Street, St Leonards NSW 2065. The views expressed in CREDIT MANAGEMENT IN AUSTRALIA are not necessarily those of Australian Institute of Credit Management, which does not expect or invite any person to act or rely on any statement, opinion or advice contained herein (whether in the form of an advertisement or editorial) and neither the Institute or any of its employees, agents or contributors shall be liable for any opinion contained herein. © The Australian Institute of Credit Management, 2019.

JOIN US ON LINKEDIN

For advertising opportunities in

Credit Management In Australia Contact: Andrew Le Marchant Ph: (02) 8317 5052 E: andrew@aicm.com.au

Click Here EDITORIAL CONTRIBUTIONS SHOULD BE SENT TO: The Editor, Level 3, Suite 303, 1-9 Chandos Street, St Leonards NSW 2065 or email: aicm@aicm.com.au

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From the President

Trevor Goodwin LICM CCE National President

s I write the final President’s

breakfasts, roadshows and seminars, and

report for this year I take time

magazine articles have been very successful,

to reflect not only on how

and in the 2018/19 financial year we achieved

quickly time has passed but

significant growth of 6.4% in membership.

on the significant contribution the AICM

We continued to boost our relevance to

has provided to the credit profession

members and their colleagues through

throughout the year with our advocacy to

the delivery of new training materials and

government bodies and regulators, our

workshops on business fundamentals for

seminars, educational training, various

credit professionals, Insolvency, Bankruptcy,

awards and our networking events and how

PPSA and Hardship. We also introduced our

strongly the Institute has progressed.

Education Foundation which was officially

2019 has been a year of business

announced at the National Conference

uncertainly impacted by the banking

and will be ramped up in 2020 to provide

royal commission, drought conditions for

scholarships and training materials. As an advocate for our members we

our farmers, difficulties in the retail and construction sectors and hardship for many

provided a diverse number of formal

consumers, amongst other challenges for

submissions such as our submission to assist

businesses. The year has also seen the

in the passing of legislation to allow ATO

continuation of low inflation and low interest

defaults to flow though to credit report

rates.

bodies. A number of our submissions were

The AICM has responded to the many

in partnership with other professional

challenges facing our industry in not

organisations such as ARITA, AFIA and

only commercial credit but in supporting

ARCA further enhancing the work we do

consumer credit professionals who are

with these bodies to improve the credit and

bearing the brunt of the focus on consumer

finance sectors in Australia. The highlight of the year was the recent

protection by holding Hardship and Personal Insolvency workshops. This year the Board

national conference on the Gold Coast

appointed a Consumer Director, Debbie

which was an outstanding success with

Leo, to drive the consumer credit portfolio

an excellent variety of topics delivered by

with support from the local Divisions

engaging and highly qualified presenters

and consumer credit professionals. This

covering subjects involving both commercial

new portfolio will ensure we continue to

and consumer credit. Feedback from our

concentrate on servicing all members of the

survey on the conference was very positive.

Institute and attract new members from the

It was very pleasing to see a record number

consumer sector as well as the commercial

of delegates attend the conference to upskill

credit area. Our inclusion of consumer-

and learn about the latest trends, processes,

specific sessions at the recent national

technology and legislation, while enjoying

conference were of high quality and well

the company of old and new friends. We

supported by delegates.

thank our conference and Credit Team of

Throughout this year our networking events, the education workshops, webinars,

the Year sponsor Equifax, Presidents dinner and YCP sponsor, illion, the exhibitors,

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

From the President

aicm

and importantly the delegates who make this event the largest gathering of credit professionals in Australia. In 2019 we saw growth in the participation for our awards and events including YCP, Credit Team of the Year, WINC, and the Pinnacle Awards, recognition of our new Certified Credit Executives and the awarding the CCE Dux and Student of the Year awards. The last official event for the year were the Pinnacle awards which highlight the leaders and high achievers in

into the future and to continue the growth

our industry.

in our membership base and to maintain our

I congratulate our 2019 award winners:

strong financial position. To all members and their colleagues,

z YCP – Ashleigh Mason z CTOY – AGL

please stay involved in your local division

z CCE Dux – Leanne Farrugia

events and attend our seminars, toolbox

z Student of the year – Judith Riley

and network evenings. It is a great way to

z Presidents Trophy – Victoria/Tasmania

network with fellow credit professionals

z The various Pinnacle award winners in

and learn about the latest developments in credit.

each State

Volunteers are the heart of the Institute

I also congratulate the members who obtained their Certificates III or IV,

at local division level and I thank them all for

Diploma in Credit Management and CCE

their contribution throughout the year. I am

qualifications during the year, and members

also immensely grateful to our partners and

who were awarded with Life membership

supporters who play a crucial role within the

and became a Fellow of the Institute. 2019

Institute. Thank you also to my fellow Board

also saw many new members joining the Institute and I welcome them to the AICM

members and the National office team

and hope they find their membership

for their efforts and enthusiasm. Your

extremely worthwhile and I encourage them

commitment is greatly appreciated. In closing on behalf of the Board and

to get involved in their local divisions. 2020 promises to be a year of growth for

staff I wish all members and their families

the Institute as we enhance our standing in

a very Merry Christmas and a happy, safe

the consumer credit sector amongst other

and prosperous New Year. We look forward

initiatives such as the Education Foundation.

to working and engaging with you in 2020

2020 will not be without its challenges

to make the year a special one for all of us

and the Board will meet these challenges

involved in this industry.

positively and early in the new year will meet to further develop and implement our

– Trevor Goodwin LICM CCE

strategies and pillars to ensure our relevance

National President

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

New credit laws need to be strengthened Nick Pilavidis, CEO, Australian Institute of Credit Management

Nick Pilavidis

The Australian Institute of Credit Management (AICM), alongside the Australian Restructuring Insolvency and Turnaround Association (ARITA), the Australian Finance Industry Association (AFIA) and the Australian Retail Credit Association (ARCA), welcome the passage through parliament of the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019. AICM and other industry bodies have long advocated for the introduction of laws that ensure critical historic information is available to allow businesses to understand whether the entities to which they extend credit have the capacity and character to service repayment of their debts. We provided a joint submission to the federal government during the consultation paper that clearly sets out our position on this. We would now like to see the law go even further to ensure the small number of businesses that don’t pay their tax debts are not given an unfair advantage, and to ensure businesses are fully informed when making credit decisions. Under this amendment to the tax integrity laws, the Australian Taxation

Office can disclose businesses’ tax debt information to registered credit reporting bureaus (CRBs) under certain criteria. The business must have an Australian Business Number (ABN), it must have one or more tax debts of at least $100,000 overdue by more than 90 days. Also, the business must not be engaging with the ATO to resolve the debt. It’s important to understand the ATO would only disclose this information as a last resort, after unsuccessfully seeking to engage the business over a lengthy period. As the legislation stands, tax debt information will be removed from the record if they do engage with the ATO. On a practical level, this means businesses with a tax debt could repay a very small amount, even $20, and be removed from the record. They could also lodge a dispute with the tax office regarding the nature of the debt and also be removed from the record, which seems to be counter to the spirit of the legislation. Additionally, if a business’s tax debt is disclosed and the information is subsequently removed, it’s not safe to assume the debt has been cleared. The entity may have entered into a payment plan or lodged a dispute.

“AICM and other industry bodies have long advocated for the introduction of laws that ensure critical historic information is available to allow businesses to understand whether the entities to which they extend credit have the capacity and character to service repayment of their debts.” 6

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Credit Management

Also, just because a business has a clear credit file, this does not necessarily mean it has met its tax obligations. While we consider this legislative amendment to be a good first step, we believe it should be reviewed and amended to make it more effective and achieve its intended outcomes. We urge the federal government to drop the $100,000 threshold to $10,000 and to keep information about businesses that have accrued a tax debt on the record for a period of five years. Taking this step would: z Help all credit providers make fully-informed decisions when extending credit to entities that have or have had a tax debt. z Reward businesses that comply with their tax obligations and incentivise them to continue to do so. z Reduce risk in the business sector by lessening the likelihood of a business suffering a loss as a result of unknowingly extending terms to a business that has or has had had a tax debt. z Ensure businesses are not inadvertently engaging with an entity that is essentially trading while insolvent as a result of not settling an undisclosed tax debt. z Give the business sector more confidence when trading with small entities, which are presently considered to be high risk when it comes to providing credit and, as a result, stimulate activity in the small business sector. z Assist credit providers to identify new entities associated with a phoenix company given information about businesses with a tax debt will remain on the record. z Deter unscrupulous business owners manipulating the shortfalls of the legislation from avoiding their tax obligations. z Encourage businesses with tax debts to engage with the ATO.

“For too long, businesses have been able to hide what amounts to illegitimate borrowing by not paying their tax. Initiatives that lead to the disclosure of a counterparty’s true debt position are in credit managers’ best interests and will create a more level commercial playing field.” z Ensure businesses have access to appropriately-priced credit. Commenting on the new laws, John Winter, chief executive officer, Australian Restructuring Insolvency and Turnaround Association, notes it will mean credit managers have greater access to information to assess counterparties’ creditworthiness. “For too long, businesses have been able to hide what amounts to illegitimate borrowing by not paying their tax. Initiatives that lead to the disclosure of a counterparty’s true debt position are in credit managers’ best interests and will create a more level commercial playing field,” he says. “It’s disappointing the $100,000 limit was set so high. In the future, we may go back to the federal government with evidence to show setting the bar this high means businesses face undue losses by running the risk of providing credit to entities with tax debts below this amount,” he adds. Mr Winter recommends credit managers keep a record of instances in which they believe a counterparty has been unable to meet its obligations as a result of an undisclosed tax debt. “This will give us the evidence we need when we go back to government in the future and ask for changes,” he says. Helen Gordon, AFIA’s chief executive officer, says its members support federal government policies that give credit providers access to information so they can more

accurately assess credit risk. This aligns with AFIA members’ objective to finance Australia’s future by enabling small businesses to access finance at a price that appropriately reflects the risk to which they are exposed. “We believe lowering the $100,000 threshold would better achieve the policy’s objectives to enhance credit decisions for the benefit of customers and credit providers. It would also encourage businesses to continue to pay their taxes. Importantly, it would minimise the risk of credit providers extending further credit to entities already facing financial difficulties evidenced by the non-payment of their tax debt,” Ms Gordon adds. Mike Laing, ARCA chief executive officer notes under the legislation, the ATO can use the disclosure of information and the credit reporting system as a bargaining chip. “Allowing information about tax debts to disappear is contrary to the way the credit reporting system operates in Australia and around the world. This limits the usefulness of the legislation,” he says. In light of the legislation’s limitations, to reduce the risk of nonpayment, it’s essential for credit managers to continue to perform full credit assessments and continue monitoring creditors for signs of insolvency. Businesses should be aware information will start to be reported following royal assent, after the legislation passed through the Senate on 16 October.

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

2019 in review By Mike Laing* This year the Australian economy entered unchartered territory; economic and wages growth stagnated while interest rates approached zero and negative interest rates were not just considered a possibility, but perhaps a necessity. The finance sector has also had to navigate the final report of the Banking Royal Commission and the focus on compliance and new regulation that has followed. The unique economic and regulatory environment of 2019 has driven the agenda for participants in the retail credit industry in particular. Responsible lending has been in the spotlight since the Royal Commission hearings began, and headlines highlighted the need for lenders to improve their assessment of a borrower’s expenses and capacity to repay well before the final report was released this year. And sure enough, early this year the final report confirmed responsible lending practices as a key focus point moving

Mike Laing

forward, while ASIC also kicked off its review of its responsible lending guidance. At the start of the year it seemed certain that industry would need to make significant changes to lending processes. At the time of writing we are awaiting the outcome of ASIC’s review to its responsible lending guidance, but it looks like lenders will be asked to do better, not necessarily more, work. This year has also seen digital disruption, and a wave of new entrants have braved the otherwise challenging economic and regulatory front to take on the incumbents. 2019 has seen a number of newly-minted ADI holders intending to disrupt the mainstream market. These entrants are primed to benefit from economywide initiatives such as the Consumer Data Right, the widespread adoption of comprehensive credit reporting and consumers’ embrace of the datadriven and online retail economy. While some new entrants are focussed on mainstream lending products, some mainstream lenders have this year fixed their sights on the rapidly growing buy now pay later sector. Players in that market report at least 4 million customers this year (double the 2018 figure). It’s not clear how that business model – or the regulation that currently only brushes it – will evolve. But it’s clear from developments over the last 6 months in particular, that more established lenders such as Latitude, Flexigroup and even CBA are not going to let newer entrants go unchallenged in that market. Another theme that has emerged through 2019 and will continue to influence the agenda for 2020 is the impact of the economic, regulatory, and competitive environment on access to credit for consumers sitting outside lenders’ risk appetites.

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Increased focus and cost around regulatory compliance will shorten credit providers’ spectrum of acceptable risks. Announcing the RBA’s October rate cut, Governor Philip Lowe said, “Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality”. I agree, and I’d suggest that most new neobank and fintech market entrants are seeking to cherry pick the best quality customers rather than target the underserved. On the flipside, unregulated lending products (which are not subject to rigorous lending assessments) are growing and pay day lending continues to serve consumers that are less attractive to risk-averse lenders. And on that note: while I hope industry, government and regulators will work together to ensure 2020 further develops the positive trends we’re seeing in the power of data to increase competition, innovation and customer experience, I also see a need for all stakeholders to keep consumer awareness and education in mind too. Low levels of data literacy mixed with low levels of financial literacy creates a dangerous cocktail. This year, ARCA members supported ongoing funding of our consumer education campaign, CreditSmart.org.au. Over the last 12 months in particular the CreditSmart resources and public relations campaign has supported customers through industry’s transition to comprehensive credit reporting. ARCA members’ continued support for consumer education means we’ll be able to bring customers along as industry navigates the challenges and opportunities ahead in 2020. *Mike Laing Chief Executive Officer Australian Retail Credit Association Email: mlaing@arca.asn.au Ph: 03 9863 7859

LINPEPCO EMPOWERS ITS CUSTOMERS & COLLECTIONS TEAM WITH A CLOUD-BASED AUTOMATION SOLUTION CUSTOMER TESTIMONIAL

BACKGROUND

BENEFITS

LinPepCo is a Pepsi-Cola franchisee with 25 years in the distribution business in the USA. One of its digital transformation projects was to digitise and automate its accounts receivable (AR) collections process.

LinPepCo went live with Esker’s Collections Management solution in early 2015. Since then, the company has achieved a number of impressive business benefits.

Before Esker, LinPepCo relied on a largely manual process to manage its collections. Paper was prevalent, as the team was tasked with printing statements and sending reminders by hand. “A lot of cost and manual labour went into that,” said the Director of IT at LinPepCo. “We knew there had to be a faster, more cost-effective way to help our staff collect and our customers make payments. Esker’s Collections Management product offered that solution.”

§ Virtually eliminated customers in the 90-day past-due category

§ Reduced DSO

§ Freed up staff time to spend more time on strategic things like aging reports, contacting customers, reconciliation § 69% increase in auto-pay customer § Improved customer experience

SOLUTION A key goal LinPepCo wanted to achieve in implementing a new solution was to utilise as few different systems and technologies as possible. Ultimately, it was Esker’s automated Collections Management solution that stood out for its robust capabilities and integration with VIP, LinPepCo’s existing accounting system. Esker’s business partnership with VIP meant a fast and seamless solution delivery process for LinPepCo with very few technical resources needed to set up the solution. “Esker checked off so many boxes for us that we really had no reason to test other solutions. It was perfectly compatible with what we had in place and the implementation process couldn’t have been more painless. After just a few weeks of going live, we had customers and team members telling us how slick the solution was.” Approximately 67% of LinPepCo’s customer base (3,800 customers) is currently accessing Esker’s cloud-based solution. Nearly 1 in 4 customers is using the auto-pay feature, which has proven to be a significant time-saver for both the company and its customers.

“Esker was perfectly compatible with what we had in place and the implementation couldn’t have been more painless. After just a few weeks of going live, we had customers and team members telling us how slick the solution was.” Director of IT at LinPepCo

“All our goals have been accomplished with Esker’s Collections Management solution. Payment reminders are being sent out electronically, our staff is more productive and proactive, and our customers are happy. Everything we were hoping for was delivered.” CFO at LinPepCo

www.esker.com.au Eric Maisonhaute • +61 2 8596 5126 • eric.maisonhaute@esker.com.au

Credit Management

SME sector turns to non-bank lending

as business owners voice concerns about property security, loan rejection and cash flow Key issues that credit managers should be aware of, drawn from the results of the latest Scottish Pacific SME Growth Index By Peter Langham*

Peter Langham

The Australia business sector has reached a watershed moment when it comes to small to medium enterprises and how they secure credit. For the first time, according to results of our September 2019 Scottish Pacific SME Growth Index, SMEs indicated they are more likely to turn to a non-bank rather than their main bank to fund their growth. This is the culmination of a fiveyear trend the SME Growth Index has tracked, with businesses moving away from their banks when it comes to funding growth. The proportion of SMEs planning to borrow from their main bank to fund growth has almost halved over the past five years, falling from 38% in 2014 to 18.3% now. The proportion of businesses now planning to turn to a non-bank for growth funding sits at 18.7% and has steadily increased over the past five years. Business owners nominate the key reason for turning to non-bank

lenders as being able to avoid using property as security against new or refinanced loans. SME Growth Index research is conducted twice yearly by banking analysts East & Partners on behalf of national working capital funder Scottish Pacific. More than 1000 owners, CEOs or senior financial staff of SMEs across a range of industries throughout Australia, with annual revenues of $A1-20 million, are surveyed.

Growth funding intentions: Non-banks pass banks East & Partners had forecast that nonbanks would pass banks as growth lenders before mid 2020, but SME funding plans are obviously shifting quickly as the threshold has been crossed in 2019. Banks have consistently lost ground each round since Scottish Pacific’s twice-yearly Index started collecting this data in 2014. With this round’s record high preference for non-bank lending,

“Business owners nominate the key reason for turning to non-bank lenders as being able to avoid using property as security against new or refinanced loans.”

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Credit Management

“Australian Banking Association data released this year indicated that small business loan applications to banks has declined by one third since 2014, with respondents indicating that a lack of access to funding is their key restraint to starting a small business.” only 2.6% of SMEs would not consider using a non-bank lender, down from 4% last year. Almost one in 10 SMEs don’t know how they will fund investment and are open to ideas. Consistently over the past five years, the dominant way to fund growth has been for business owners to dip into their own funds – this round, it was the growth funding choice for 83% of SMEs. This is despite other business funding options being available that would allow them to save their own funds for personal investments. SME Growth Index tracking of the trend to non-bank lending matches a finding of recent banking industry research. Australian Banking Association data released this year indicated that small business loan applications to banks has declined by one third since 2014, with respondents indicating that a lack of access to funding is their key restraint to starting a small business. While it’s pleasing that business owners are increasingly aware of options outside a property-secured bank loan, the SME sector still has a long way to go in taking advantage of the alternatives available to them.

It’s reasonable to assume that some business owners are still simply unaware of funding alternatives to the banks, however we believe there’s a much larger group of business owners who are aware of non-bank funding but don’t fully understand how it works. They are too busy to research it, so put action on changing funding methods in the “too hard” basket. When they can’t secure bank funding, they just tip their own money in to fund growth. There are smarter ways to fund long-term business growth.

Most popular sources of alternative finance Of the business owners who say they are using non-bank funding options to fund growth, the most popular alternative finance products* are: z invoice finance (also known as

debtor finance) – used by 77% of respondents z merchant cash advances – 23% z P2P lending – 10% z Crowdfunding – 9% z Other online lending – 5% (*This biennial question was asked in the March 2018 SME Growth Index and will be asked again in 2020 to continue to track trends).

SMEs say property security is a credit turn-off The key reason for SMEs turning to non-bank lenders, according to SME Growth Index findings, is to avoid property security (21.3% of respondents nominated this, up from 18.7% in September 2018). This negativity or concern around property security comes in light of Australia’s less than buoyant property market over the past 18 months, as ➤

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

well as uncertainty about whether the housing price correction has run its course. It is also on the back of Census data that highlights a slow but marked decline in levels of home ownership since the early 2000s. This is an interesting trend, highlighting that Australia’s future entrepreneurs, especially those based in Sydney and Melbourne where the property market has taken the biggest hit, must look beyond the family home or their other property to fund the growth of their businesses. Repercussions from the Banking Royal Commission are still resonating with the small business sector and formed another key reason SME owners gave for turning to non-bank lenders. Almost one in 10 (8.8%) said Royal Commission disclosures on

misconduct in the banking sector was the reason they use non-bank lenders to fund their growth. The impact of the Royal Commission might also account for the significant increase in SMEs citing a lack of bank appetite to provide them credit. This was the key reason 6.9% of respondents gave for turning away from bank-based borrowing – a proportion which has doubled from 3.2% last year. One in five businesses say they look to non-bank lenders to avoid banks’ onerous regulatory and compliance requirements. Almost one in five are attracted by fast credit approval turnaround times and capital being available quickly. This figure has fallen substantially from previous rounds, perhaps

“Repercussions from the Banking Royal Commission are still resonating with the small business sector and formed another key reason SME owners gave for turning to non-bank lenders. Almost one in 10 (8.8%) said Royal Commission disclosures on misconduct in the banking sector was the reason they use non-bank lenders to fund their growth.”

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

because business owners now expect fast approval by non-banks and are finding other factors to induce them to look beyond the banks. Looking at the issue of property security, the SME Growth Index findings highlight a real conundrum. Business owners are increasingly aware of options beyond the family home to secure business funding. They also clearly state that it’s their preference to not use property as security for business lending. And yet, the statistics also show that many are still not looking beyond property. According to SME funding expert Neil Slonim of theBankDoctor, SMEs have a lack of understanding about pricing for risk. He says it’s also a matter of being unwilling or unable to act on their “no property security” preference.

Credit Management

This issue of lack of understanding is one that ASBFEO’s Kate Carnell, jointly with Scottish Pacific, is seeking to address via the Business Funding Guide initiative (see section below).

SMEs expecting to grow, but employing fewer staff The September 2019 SME Growth Index highlights useful information for credit managers about the typical Australian SME with $1-20m revenue. This average SME is: z Staying in business longer but employing fewer full- time staff than five years ago (average FTE headcount now is 68, down from 72 last year and 88 in 2014). z Expecting modest revenue growth of 2.7% for the remainder of 2019. z Not wanting to use personal property to fund their business (yet seven out of ten continue to do so).

Loan rejection leading to cash flow concerns This round of the SME Growth Index found that increasingly businesses are struggling to meet tax payments on time and are unable to take on new work due to cash flow constrictions. Business owners consistently name government red tape and compliance as their greatest cash flow issue (nominated this round by almost three-quarters of respondents). More than a quarter of SMEs (27.8%) say they have difficulty meeting tax payments on time. This has crept up from 24.8% 18 months ago. Only one in ten SMEs say they are on top of cash flow. More than one in five SMEs had cash flow issues due to a loan being declined, and a similar proportion were unable to take on new work because of cash flow problems. SMEs – whether they are growing, stable or declining – have flagged that their cash flow woes are increasing. The cash flow situation has

“It’s food for thought for credit managers to discuss with business owners: are they funding their business in a way that optimises cash flow? Do they have the right advisors in place to help them find the right funding and to guide their business growth?” deteriorated for one in five SMEs, with 7.3% saying it is significantly worse and 12.3% saying it is worse than the previous year. The percentage of SMEs reporting significantly worse cash flow has doubled since March 2018. In addition, fewer SMEs are reporting significantly better cash flow (22.3%, compared to 26.8% in March 2018). For the total SME market, there has been a 10-percentage point fall in SMEs who report their cash flow is better or significantly better, falling from 68.9% a year ago to 59.4% this round. At the other end of the spectrum, a year ago one in ten SMEs said cash flow was worse or significantly worse – now almost one in five are saying so. For growth SMEs, almost twice as many as in H1 2018 say their cash flow is worse or significantly worse (21.2%, up from 12.3%). The impact of poor cash flow on the Australian economy is considerable. In 2018 East & Partners extrapolated that this issue costs the SME sector more than $235 billion annually in lost revenue. If business owners don’t find new ways to deal with perennial cash flow issues, Australia’s growth potential will continue to be constrained.

Business Funding Guide to help SMEs find the right finance fit A business struggling with cash flow can only stretch working capital so far before something has to give. It’s food for thought for credit managers to discuss with business

owners: are they funding their business in a way that optimises cash flow? Do they have the right advisors in place to help them find the right funding and to guide their business growth? The fact that one in five businesses is struggling with cash flow because they’ve had business funding rejected is a massive wake up call to SMEs and their advisors to make sure they are funding their business in a way that optimises cash flow. Scottish Pacific in partnership with the Australian Small Business and Family Enterprise Ombudsman this year released a comprehensive independent guide outlining a wide range of funding options suitable for different small business needs. The Business Funding Guide, targeted at advisors such as accountants, brokers and bookkeepers, and the FitsME Guide, its short companion for businesses, are both available as free downloads. We’d encourage all credit managers to download the guide and familiarise themselves with it.

*Peter Langham Chief Executive Officer langhamp@scottishpacific.com Ph: 1300 209 417 Scottish Pacific is Australasia’s largest specialist working capital provider, helping thousands of business owners with the working capital they need to succeed. Scottish Pacific prepared this article from excerpts of their twice a year SME Growth Index research. To download the latest Index or request previous Index research please visit www.scottishpacific.com/news/research

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

Transform your accounts receivable process to word class using best practice By Terry Eames*

Terry Eames

In the 18th century, invoices were penned with quills and pots of ink. In the 19th century, they were scrawled out with fountain pens. During the space race, they were scribbled with ball points, and over the last fifty years, they’ve been pecked out on keyboards – first on typewriters, and then on computers. But aside from the tools used, the fundamental act of Accounts Receivable – a department as old as business itself – hasn’t changed for hundreds, if not thousands of years. This is bad for business. Why? Because it’s a huge missed opportunity. Today, the process of issuing and fulfilling invoices is largely transactional. It lacks a human element. The process is one we all know well – a business or service provider issues an invoice, and then waits for (or chases) payment. But this process, if done well, is actually a prime opportunity to build new client relationships and strengthen existing ones. Sadly, almost all Australian businesses are missing this, and it comes at their own detriment.

So how does a business actually build or strengthen relationships through Accounts Receivable? The first step is the biggest, and it requires us to rethink the entire process. No more should businesses simply issue invoices with an inefficient, manual, and paper-based approach that is fundamentally the same as it was hundreds of years ago. Instead, B2B accounts should be built on the ease and simplicity that has redefined the B2C world. By giving enterprise customers access to all their accounts information through a self-service portal, they’re empowered to take control of billing at their own time and on the device of their choosing. While convenience is a key benefit of such an approach, another is clarity. By removing the guesswork around when invoices are due, the status of disputes and orders-onhold, customers no longer need to spend hours confirming and following up. They can focus on running their business and, ultimately, placing more orders.

“No more should businesses simply issue invoices with an inefficient, manual, and paper-based approach that is fundamentally the same as it was hundreds of years ago.”

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Credit Management

“...more important for a business in the long term is that moving away from the old approach builds customer loyalty... First and foremost, it eliminates the hassle and uncertainty of the old system where Credit Managers are constantly issuing copy invoices or chasing payment.” Transforming Accounts Receivable comes down to meeting your customers when and where they want to be met. Consider a busy salon owner or a pharmacist. During ‘office hours’ they’re too busy doing what they do best to follow up on the status of their accounts. The traditional manual approach to Accounts Receivable means invoices can slip through the cracks, putting them in arrears, and forcing their future orders to be placed on hold. This frustrates all involved – the client, the credit manager, the sales team – and results in hours of follow ups that the client would rather use servicing their customers, that the credit manager would rather use adding value to the business, and that the sales team would rather use finalising sales. In practice, this means having software that enables you and your customers to step back from the time consuming and annoying old way of doing Accounts Receivable to one that streamlines the process and provides the analytics you need for your business. By enabling clients to pay invoices online, have accounts direct-debited, and see all relevant account information online – with the ability send invoices via email, SMS or even directly into the client’s

accounting systems – all parties know where they stand. This removes the frustration and confusion that can sour customer relationships. Further, a transformed Accounts Receivable – built on a consumer-like self-service portal – also enables the automation of back office functions that allows Credit Managers to focus on building relationships and driving value through the business. In an era where many enterprises are looking to offshore accounts roles, sacrificing customer service quality in a tradeoff for fiscal savings, a re-imagined Accounts Receivable platform enables Credit Managers to work more efficiently while simultaneously nurturing the relationships the business relies on for revenue and cash flow. Good luck nurturing anything with an accounts team based in another country, thousands of kilometres away. But perhaps more important for a business in the long term is that moving away from the old approach builds customer loyalty. How? First and foremost, it eliminates the hassle and uncertainty of the old system where Credit Managers are constantly issuing copy invoices or chasing payment. It centralises all this work into one simple location, and

then enables the tedious and timing consuming tasks to be automated. From there, cash flow improves by giving clients all the information they need to pay invoices on time, reducing days outstanding and orders on hold. Finally, it provides customers with a digital experience, delivered through the cloud, so they can access the information whenever and wherever they need to. All this gives your customers a significantly better experience, one that builds loyalty. After all, if your clients like doing business with you, they’ll do more business with you. Sticking to the old way of managing Accounts Receivable — the same ideas and processes that have not changed for centuries — means missing opportunities. This department can be so much more. It’s time for businesses in Australia to widen their perspectives and see the potential this change can bring. Accounts Receivable can be so much more than ones and zeroes – with the right technology, it can also be hearts and minds.

*Terry Eames MICM Director Sales and Partnerships, SurePayd Ph: 0414 568 902 Email: terry.eames@surepayd.com www.surepayd.com

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

Australian SMEs struggle in conditions likened to the global financial crisis By Patrick Coghlan*

Economic stats offer a telling snapshot of Australia’s big businesses and industries, but it’s often small businesses – the backbone of our economy – that are forgotten. As a result of our trying economic climate, companies are struggling to get paid and will continue to fail. Our Q3 Small Business Risk Report, which collates data from 26 unique sources, including ASIC, ABR, AFSA, courts and debt collectors, paints a worrying picture for the future of Australia’s SMEs. This is the data that’s being neglected, so it’s more important than ever that small businesses pay attention and strive to protect their cash flow. The latest Small Business Risk Review data suggests that the number of Australian SME insolvencies has increased 20 percent over the last quarter – up five percent year-on-year.

Our economy is worsening, and no state is exempt Administrative insolvencies are almost at a level reflective of the

Patrick Coghlan

Global Financial Crisis. Court actions (brought by creditors when debtors default) have increased 8.8 per cent year-on-year and payment defaults are also up 13 percent year-on-year. This combination of adverse data indicates the worst may be yet to come for small businesses across the entire country, as the state-specific data suggests: z New South Wales: Court actions increased 63 percent over the last quarter z Queensland: Court actions increased 25 percent over the last quarter z Western Australia: Court actions increased 21 per cent over the last quarter z Victoria: Court actions showed a marginal decrease – down two percent over the last quarter. However, the decrease comes after four consecutive quarters of growth including a record number of court actions recorded in Q2 2019. All industries are feeling the pressure.

“The latest Small Business Risk Review data suggests that the number of Australian SME insolvencies has increased 20 percent over the last quarter – up five percent year-on-year.”

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Credit Management

“The Australian economy relies on small businesses, which means the impact of payment defaults and court actions is widereaching, affecting millions of everyday workers. Small businesses will struggle to grow and make new investments, as debtors pay more slowly (or not at all) and suppliers push for faster payment.”

The national quantity of insolvencies 8000

YOY%:

6604 6000

5683

5393 4770

4770

4217

4000

2000

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q3 percentage change in the number of court actions, by industry 40%

The construction industry’s growth has significantly slowed, the property market has turned, and brick-andmortar retailers continue to struggle to meet the rise of ecommerce. Even then, consumers are reluctant to spend big in a bid to limit their credit and save in preparation for the festive season.

21% 15%

13%

Construction Professional, Retail Manufacturing Scientific and Technical Services

12%

Wholesale trade

These are uncertain times The Australian economy relies on small businesses, which means the impact of payment defaults and court actions is wide-reaching, affecting millions of everyday workers. Small businesses will struggle to grow and make new investments, as debtors pay more slowly (or not at all) and suppliers push for faster payment. Risk is integral to growth, but people and businesses operating in 2019 are understandably reluctant to take on risky customers. The Federal and NSW elections, in particular, saw businesses enter a state of holding – refraining from spending, hiring or investing. The

result was a significant downturn in spend across B2B and B2C.

Relief isn’t on the horizon – yet We tend to look at court action figures as a ‘canary in a coal mine’; as the numbers increase – and businesses lose the certainty of being paid by debtors – so too, do the numbers of insolvencies. Unfortunately, conditions are likely to get worse for industries like retail, construction, property or manufacturing before they get better. The detrimental impact on Australian SMEs should not be taken

lightly: the Christmas festive period could also be make-or-break for many. Thankfully, there’s no need to go into the New Year blind-sided. A range of innovative preventative risk analysis tools are available to help businesses secure their cash flow and navigate through these tricky economic times.

*Patrick Coghlan MICM CEO CreditorWatch Ph: 1300 50 13 12 www.creditorwatch.com.au

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Consumer Credit

Keeping up with the National Credit Code – What’s new?

Increased ASIC powers, design and distribution obligations and a new EDR scheme are all changes to the regulation of credit in Australia over the past 12 months. There is great change in the consumer credit space post the Banking Royal Commission. By Andrea Beatty and Chelsea Payne* There have been a number of significant updates in consumer credit over the past 12 months, many of which were enacted as a result of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. This article will provide you with a high-level overview of the main changes to the National Consumer Credit Protection Act 2009 (NCCP Act) to allow you and your business to be up to date on changes. Andrea Beatty

Chelsea Payne

ASICs Product Intervention Power The concept of a product intervention power for ASIC was introduced by the Financial System Inquiry’s Final Report in December 2014, as a tool of last resort or preemptive measure where there is a risk of significant detriment to a class of consumers. The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill came into force on 5 April 2019. From 6 April 2019, ASIC has the power to make orders requiring a person to not engage in specified conduct in relation to a financial

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

product if ASIC is satisfied that the financial product has resulted in, will, or is likely to result in significant detriment to retail clients or consumers. For the purposes of the product intervention power, a ‘financial product’ is defined to be an ASIC Act financial product, which includes credit products. For the NCCP Act, the power applies to all products that may be provided by a person in the course of engaging in a credit activity or proposed credit activity, such as credit contracts, mortgages and consumer leases. Amendments to the Corporations Act enable the Corporations Regulations or ASIC to declare products to be ‘financial products’ for the purposes of the product intervention power. However, the amendments to the NCCP Act do not contain an equivalent provision. ASIC is required to consult with affected persons prior to making the product intervention order, which ASIC has been doing by way of releasing consultation papers with draft legislative instruments. On 9 July 2019, ASIC released Consultation Paper 316 (CP 316) which outlines their proposal to use

Consumer Credit

“For the NCCP Act, the power applies to all products that may be provided by a person in the course of engaging in a credit activity or proposed credit activity, such as credit contracts, mortgages and consumer leases.” prohibit issuers of CFDs providing certain inducements to retail clients to open a CFD trading account or trade in CFDs with the issuer. On 1 October 2019, ASIC released Consultation Paper 324 (CP 324) which outlines their third proposed use of the product intervention power in relation to add-on financial products sold by caryard intermediaries. The proposed draft legislative instrument intends to introduce a deferred sales model, as well as a number of other additional obligations including an online consumer roadmap.

Design and Distribution Obligations their product intervention power for the first time to address the significant consumer detriment arising from some short term lending models. On 12 September 2019, ASIC registered a legislative instrument prohibiting credit providers and associates from providing short term credit and charging for additional or collateral services. This legislative instrument is currently being challenged in the Federal Court by Cigno Pty Ltd, one of the two businesses targeted by ASIC in the development of the order. Cigno argues that the model ASIC is

regulating is not in itself a financial product under the ASIC Act, the case is scheduled for a hearing on 30 March 2020. On 22 August 2019, ASIC released Consultation Paper 322 (CP 322) which outlines their second proposed use of the product intervention power in relation to over-the-counter (OTC) binary options and Contracts for Difference (CFDs). The proposed draft legislative instruments will ban the issue of OTC binary options to retail clients, prohibit the issue of CFDs to retail clients that do not meet prescribed conditions and

The new design and distribution obligations require offerors (issuers and certain sellers) of financial products intended for retail clients to consider the intended clients of their products, design products to be appropriate for their intended clients and to take steps to ensure that products are not offered to persons outside their target market. The obligations apply to financial products that are offered under a disclosure document or Product Disclosure Statement, or which are issued to retail clients. As with the product intervention power, the ➤

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Consumer Credit

“If ASIC is satisfied that a design and distribution obligation has been contravened, it may order a regulated person to not engage in specified conduct in relation to retail clients. However, prior to making such an order, ASIC must hold a hearing and allow any interested person to make submissions...” design and distribution obligations apply to ASIC Act financial products, meaning they also apply to credit facilities. The objective of the new obligations is to assist consumers to obtain appropriate financial products by requiring issuers to consider their target market in the design, market and distribution of financial products. The key obligations for regulated persons are: z for financial product offerors, to prepare a ‘target market determination’ in relation to a product, which identifies the class of persons the product is directed towards, limitations on the product’s distribution and conditions requiring a review of the target market determination; z to not engage in any retail product distribution activity unless and until a target market determination has been made; z to take reasonable steps to ensure that a financial product is distributed consistently with its target market determination; and z to notify ASIC upon becoming aware of significant dealings in a financial product that are inconsistent with the target market determination. The target market determination must be made so that if the product is issued or sold to a retail client in accordance with the target market determination, the product is consistent with the likely objectives,

financial situation and needs of the client. Although this obligation is phrased as if an offeror identifies a target market given particular product specifications, in practice offerors will need to identify their target retail clients at the outset and then design the financial product to be appropriate to those clients. If ASIC is satisfied that a design and distribution obligation has been contravened, it may order a regulated person to not engage in specified conduct in relation to retail clients. However, prior to making such an order, ASIC must hold a hearing and allow any interested person to make submissions (unless any delay in making the order would be prejudicial to the public interest, in which case ASIC may make a 21 day interim order).

AFCA The Australian Financial Complaints Authority (AFCA) began operations as the sole financial services external dispute resolution (EDR) scheme on 1 November 2018, replacing the Credit and Investments Ombudsman (CIO), Financial Ombudsman Service (FOS) and the Superannuation Complaints Tribunal (SCT). In its first 12 months, AFCA

received 73,272 complaints, a significant increase on the 55,000 complaints estimated and the number of complaints received from the former EDR schemes in the previous year. AFCA’s powers are similar to those under the previous schemes. However, there are a number of differences. AFCA has an increased monetary limit of $1 million and a compensation cap of $500,000 for most nonsuperannuation disputes. There are no monetary limits and compensation caps for disputes about whether a guarantee should be set aside where it has been supported by a mortgage or other security over the guarantor’s primary place of residence. These increased monetary limits have contributed to the $185 million in compensation awarded to consumers in the first 12 months of operations. AFCA has also relaxed the definition of small business, so that businesses with fewer than 100 employees at the time of the act or omission by the financial firm that gave rise to the complaint can access AFCA. Although small business claims will not involve NCC-regulated credit, credit providers and credit assistance providers should be aware of their obligations towards small businesses. In its first twelve months, AFCA received 3,869 complaints from small businesses, primarily relating to misleading product or service information. Similar to the previous EDR schemes, there is no clear right to appeal non-superannuation related AFCA determinations. Although appeal rights have not changed since the previous scheme, a number of issues are raised. Unlike the previous

“In its first 12 months, AFCA received 73,272 complaints, a significant increase on the 55,000 complaints estimated and the number of complaints received from the former EDR schemes in the previous year.”

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Consumer Credit

“AFCA now has the power to publish its determinations, as well as the names of the financial firms involved, unless there is a compelling reason not to do so.” scheme, if financial firms are not satisfied with how an EDR scheme is approaching complaints, the financial firm does not have the ability to change membership to another EDR scheme. Additionally, AFCA now has the power to publish its determinations, as well as the names of the financial firms involved, unless there is a compelling reason not to do so. This can create serious reputational and financial effects on firms, as the publications effectively create precedent for other customers to bring similar successful claims.

Increased Penalties The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 introduced substantial changes to the civil penalty regime in the NCCP Act. It only applies to contraventions of civil penalty provisions that occur on or after the commencement date relevant to the applicable section. From the commencement of the amendments, the maximum pecuniary penalty for natural persons is the greater of: (a) the number of penalty units provided; or (b) three times the benefit derived or detriment avoided from the contravention (if ascertainable). The maximum pecuniary penalty for bodies corporate is the greater of: (a) ten times the number of penalty units provided; (b) three times the benefit derived or detriment avoided because of the contravention (if ascertainable); or (c) either 10% of annual turnover of all related bodies corporate for the 12 month period ending at the

end of the month in which the contravention occurred or began to occur, or 1 million penalty units (whichever the lesser). Since the amendments, the NCCP Act expressly states that, in determining the pecuniary penalty to impose, the court must take into account all relevant matters, including: (a) the nature and extent of the contravention; (b) the nature and extent of any loss or damage suffered because of the contravention; (c) the circumstances in which the contravention took place; and (d) whether the person has previously been found by a court (Australian or foreign) to have engaged in similar conduct. The amended legislation also made changes to contraventions of criminal penalty provisions that occur on or after the commencement date relevant to the applicable section. From the commencement of the amendments, the maximum pecuniary penalty for individuals is the greater of: (a) the monetary penalty specified; (b) if only a term of imprisonment for less than 10 years is specified – either imprisonment for the time period specified in the provision or a fine for the number of penalty units equal to 10 times the number of months of imprisonment specified; or

(c) if only a term of imprisonment for 10 years or more is specified – either imprisonment for the time period specified in the provision or a fine for the greater of 4,500 penalty units or three times the benefit derived from (or detriment avoided by) the contravention. The maximum pecuniary penalty for bodies corporate is the greater of: (a) ten times the monetary penalty specified; (b) if only a term of imprisonment less than 10 years is specified – a fine for the number of penalty units equal to 100 times the term of imprisonment specified (in months); and (c) if only a term of imprisonment of 10 years or more is specified, a fine the greater of 45,000 penalty units ($945,000), three times the benefit derived or detriment avoided because of the offence or 10% of the annual turnover of the body corporate for the 12 month period ending at the end of the month in which the body corporate committed or began to commit the offence. Andrea Beatty and Andrew Smith’s 6th edition of the Annotated National Credit Code, which provides a comprehensive update of the NCC, responsible lending and other consumer credit topics was published in mid-November 2019 and is available for order here.

*Andrea Beatty, Partner *Chelsea Payne, Lawyer Piper Alderman Ph:02 9253 9999 www.piperalderman.com.au

“Since the amendments, the NCCP Act expressly states that, in determining the pecuniary penalty to impose, the court must take into account all relevant matters...”

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Consumer Credit

Optimising originations: The challenges, priorities and moving forward By Poli Konstantinidis*

Digital disruption is accelerating the pace of credit decision making, expanding understanding of borrower behaviour and creating new opportunities to enhance the customer experience. Experian’s Optimising Originations research reveals digital disruption is the “new normal” and organisations are challenged by customers, compliance as well as by competitors, whilst focused on driving cost reduction and operational efficiency. Open data and Open Banking are likely accelerating the need to transform across the customer lifecycle, with originations being the starting point. Businesses identify many shortcomings in their current originations processes and can readily identify areas and key

Poli Konstantinidis

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

performance indicators (KPIs) needing improvement. There is a sense of urgency in plans to overhaul originations and a need for practical advice on how to best enhance originations in order to positively impact the whole customer lifecycle. Although originations teams vary in their approaches, they are unified by an appetite to evolve. Access to data and automation emerge as cornerstones of improvement ambitions, alongside a recognition that skills, culture and innovation also play a key role in driving originations agility. This ultimately propels customer acquisition to become the benchmark for other parts of the customer lifecycle and business.

Consumer Credit

The main business challenges over the next two years are cost reduction, efficiency pressures (67%), increasing customer expectations (60%), competitive pressure (54%) and ensuring regulatory compliance (51%).

Disrupt or be disrupted Businesses in Australia and New Zealand offering consumer credit are facing unprecedented disruption in the market as new fintech models challenge traditional approaches. Alongside this, customers have more knowledge and choice than ever before resulting in higher expectations and a reduced tolerance for suboptimal customer experience. Organisations highlight challenges from all sides. Perennial cost reduction and efficiency pressures grapple for attention with increasing customer expectations, competitive pressure and the everpresent need for regulatory compliance. These challenges are forcing businesses to re-evaluate their operating models in order to remain competitive and fit for purpose. In fact, 89% of respondents say that disruptive competitors are forcing them to rethink how they manage the entire customer lifecycle. Within financial services, responsible lending is also an ongoing concern with 76% identifying this as a corporate imperative. Alongside this, there is much hype and speculation around Open Banking and what this will mean for the industry. Although 72% of financial services respondents see it as a force for good for the industry and consumers alike, 71% admit it is already creating challenges as they rethink processes and relationships with customers. Financial services businesses vary in their readiness for Open Banking too – 12% have a business plan agreed and funding allocated. Similar proportions are researching options (28%), having active internal discussions (29%) or active internal and external discussions (28%). Other sectors such as telecoms and utilities are a little further behind in their readiness for open data, whilst three-quarters (73%) voice concerns about the challenges this poses. Against this backdrop, the spotlight falls on originations and how this function is performing in the face of such disruption. ➤

“Within financial services, responsible lending is also an ongoing concern with 76% identifying this as a corporate imperative.”

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Consumer Credit

With a performance deficit in originations, it is important to highlight where the key pain-points reside and what is making the process of acquiring customers so difficult. The top element considered to be a significant or moderate challenge to businesses in Australia and New Zealand is the need for tailored approaches to credit risk analysis depending on the financial product (90%). Together, these point to a lack of agility in the originations function and processes and the need for a more holistic approach moving forwards. Data is the fuel for optimising originations forming the foundation of any all customer acquisition decisions. The data sources most likely to be currently used to inform originations decisions are internal data (72%), followed by positive data (49%) and external data (49%). Data sources most likely to be planned in next 12 months are device intelligence (52%), income verification data (45%) and socio-economic data (45%). Data, by its very nature is dynamic. Sources of data are constantly evolving and decisions around optimal data sources ideally involve return on investment (ROI) and risk analysis, as well as regulatory impact. With two thirds of respondents saying they are concerned about the implications of using alternative data on compliance, businesses are treading carefully and likely to take a “wait and see” approach. Moving forward, businesses are keen to address originations performance in several core areas over the next two years in order to effectively compete. These include time to unconditional approval (96%), time to conditional approval (93%), cross-sell/up-sell performance (90%), customer experience feedback (89%), % of fraudulent applications (88%) and loan origination costs (88%). Ambitions and stakes are high as originations is thrust under the company spotlight as a competitive differentiator and time will tell whether these improvements fully materialise.

Is automation the answer? Many businesses grappling with cost pressures and a need to be more operationally efficient turn to automation. The originations process is no exception. From start to finish, currently an average of 51% of the originations process is automated with organisations looking to increase this to an average of 59% over the next 12-24 months in order to optimize business outcomes.

“... businesses are keen to address originations performance in several core areas over the next two years in order to effectively compete.” 24

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Consumer Credit

It seems there are considerable barriers to fully automating originations over the next few years. The key barriers to increased automation as cost, lack of technology skills and effort involved in moving from legacy systems and processes. Secondary barriers are integration challenges and inertia/reluctance to change. Improved measurement of outcomes and ROI may go some way to addressing some of these barriers, but many of these are more embedded in the culture of originations departments, and even the wider organisation, alongside skills shortages and concerns about how to balance the old and the new with the minimum of operational disruption. Organisations recognise the benefits of automation citing the outcomes they would expect from increased automation of originations data and processes as increased efficiency and productivity (72%), improved decision speed (63%), enhanced customer experience (58%) and better control and compliance (56%). These closely align as counterpoints to the business challenges they highlight as concerns over the next two years, raising questions about why originations is not automating more quickly and more extensively. Ultimately, organisations must challenge their own “automation paralysis” as nimbler competitors more readily embrace technology and data to enhance the whole customer lifecycle.

*Poli Konstantinidis, Executive General Manager Credit Services & Decision Analytics A&NZ, Experian www.experian.com.au

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December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Consumer Credit

Collection and vulnerability strategies; Better outcomes for your customers, your staff and your organisation Jodie Bedoya (eMatrix Training), Anna Brooks (Lifeline), Rosemarie Price (Ergon Energy) and Nikki Dennis (eMatrix Training). The recent panel discussion on collection and vulnerability strategies at the AICM National Conference generated a considerable amount of interest. The key questions for organisations seem to be ‘How can front line staff be compliant with organisational and regulatory requirements whilst maximising operational effectiveness?’ and ‘How do we best support our customers and staff, for better outcomes?’. Given the importance and relevance of this topic right now across key industry sectors, and the positive feedback from the conference, the panel members have been asked to share further insights regarding these key questions. The three articles below each have a slightly different emphasis, but all look at ways in which vulnerability may be managed more effectively within a credit environment: z Jodie Bedoya, Director of eMatrix Training, shares some common trends within organisations and looks at certain blockers that can exist that are counterintuitive to better supporting and assisting vulnerable customers.

Jodie Bedoya

z Anna Brooks, National Manager of Lifeline Research Foundation, delves into mental health and wellbeing; discussing how acute financial hardship can lead to suicidality and how organisations arguably have a duty of care to support customers and staff, that may be vulnerable.

Anna Brooks

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Rosemarie Price

z Rosemarie Price, Manager Retail Credit & Receipting at Ergon Energy, shares the journey of how they changed their debt collection approach to better assist vulnerable customers, and discusses how that also resulted in improved collections metrics and increased staff morale.

Nikki Dennis

Consumer Credit

AICM CEO Nick Pilavidis, Jodie Bedoya (eMatrix), Anna Brooks (Lifeline) and Rosemarie Price (Ergon Energy).

Why managing customer vulnerability is such a challenge for organisations – Jodie Bedoya Today, customer service alone can be challenging, whereas managing customer engagement in a collections/credit environment has become even more difficult for organisations. Collections team are given the ‘customer first’ values/ethos of the organisation, yet often there is no clarity of what that means for a collections team, dealing with conversations involving debt, credit defaults, repossession of goods, disconnection of services, complaints and litigation. Layer this up with vulnerability, self-harm calls, family violence, to name a few, and a collector’s role is becoming more and more complex. They now wear many hats. In working with organisations in developing strategies and training soft skills for managing collections, customer hardship and vulnerability, there are common trends eMatrix are seeing causing blockages from this occurring. Our top 6 are as follows:

1. Regulatory requirements and compliance override human conversations There is so much pressure on operations from the regulatory and compliance teams, often with policies, processes and scripts layered up on frontline staff, without collaboration with operations, written by people who have never picked up a phone to a customer. Often these processes are non-sensical and convoluted, with things wedged into conversations to tick the compliance box. This stops operators from truly listening to customers, as they are flicking between delegation matrices, intranet guides and knowledge database rules, processes and scripts. 2. Poor KPI’s You get what you measure. Layering AHT (Average Handling Time) KPI’s onto staff is counterintuitive for managing customer vulnerability. Vulnerable customers don’t come at you in a straight line. Their lives are difficult, complex, chaotic and often they cannot articulate what is happening for them. Working through these takes time and isn’t always sorted on one call.

3. Quality frameworks that don’t support the teams Quality programs should ideally be designed as a tool to assist in coaching, not catching people out. Constantly staff fear being ‘marked down’ by a faceless person in the organisation, and then dread the one-on-one that follows where they are asked what they could do better next time. 4. Over-servicing Quality frameworks can overcomplicate what kind of conversation we need to have with a customer. Often operators fear not meeting expectation, so cram in a lot of words, talk fast and feel the need to over-service; providing too much information, waffling, overtalking, cross selling, upselling, asking customers to complete surveys and sign up to reward programs, when all the customer called for was a simple answer to their question. When someone is vulnerable, their ability to take in information is limited, and can often only handle one piece of information at a time – usually the key piece of information they needed to sort their issue out but is so often lost in the litany of language. ➤

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Consumer Credit

5. Vulnerable customers aren’t always nice Just because someone is experiencing hardship or vulnerability, doesn’t mean they will be rational or polite. Stressed, scared, anxious – this may mean they swear or yell, and an operator’s go-to more often than not is “if you continue the language, I will terminate the call’, followed by ‘customer is abusive’ all over the notes. Training staff in how to manage these calls, is critical, as when this occurs, the organisation has failed to support the customer, in fact, it has alienated them. 6. Compassion fatigue A team can become disengaged when compassion fatigue kicks in – where they have heard it all before, where they become sceptical, being helpful to the customers they like, and react to those they don’t. And the toxic behaviours begin – like a vortex of negativity, staff start to share their stories. They hang up from a customer turn to their colleague and badmouth; one-up-manship begins to occur “think your customer was bad, should have heard the guy I just spoke to..”…..and so judgement begins. This then feeds on itself, as sitting next to someone who complains or whinges, changes the chemical structure of YOUR brain. You then become fatigued and absenteeism increases, as does presenteeism – here, but not here.

So, what works? Do what operationally makes sense, work in close collaboration with compliance teams, but don’t be passive in your relationship with them. Respectfully challenge and work out

“Training cannot be a one-off. It needs to be meaningful, embedded into business as usual and sustainable. And if you only have minimal training spend, invest it in your Team Leaders.” where the wriggle room is. Consider what is driving your organisation’s customer interactions – is it KPI’s, checklists and rules? And consider how you can support your teams move to more human interactions. Training cannot be a one-off. It needs to be meaningful, embedded into business as usual and sustainable. And if you only have minimal training spend, invest it in your Team Leaders.

Towards zero suicide – what role should the credit management industry play? – Anna Brooks The Global Financial Crisis highlighted to the world the potential severity of the impact of financial stress. A study in the British Journal of Psychiatry linked up to 10,000 deaths to the GFC alone. In more recent times, a number of financial management services contacted Lifeline requesting further information to prepare workforces for the impact of the Royal Commission. Dr Anna Brooks, National Manager, Lifeline Research Foundation discusses the need for a whole of community approach to suicide prevention and calls on the credit management industry to play its part. Lifeline is the largest suicide prevention service in Australia.

“A team can become disengaged when compassion fatigue kicks in – where they have heard it all before, where they become sceptical, being helpful to the customers they like, and react to those they don’t.” 28

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Established in 1953, the service operates 40 contact centres across the country providing crisis support through the 13 11 14 telephone line, online chat and face to face counselling. The service receives up to 1 million contacts per year and is staffed with a volunteer workforce of over 10,000 volunteers and 1,000 paid employees, all working to ensure that no one in Australia has to face their darkest moments alone. Both our experience and our evidenced based research demonstrates that suicide does not discriminate, and suicidality develops as the consequence of multiple factors. Those include both characteristics that are inherent to the individual, and the environment in which that person develops. A third widely recognised factor, and one of key importance, is the accumulation of life stressors. Of those potential life stressors, financial hardship can have a particularly high impact. This is due in part to the fact that it is a stressor associated with additional load including unemployment, homelessness, and relationship breakdown. Cumulatively, that load can result in mental illhealth as well as suicidality. It is well recognised that there are several cognitive stages that precipitate suicide. These include defeat and humiliation, as well as subsequent experience of a sense of entrapment. Financial hardship can heavily impact these thought processes; lack of financial resources can materially contribute to a sense of defeat and humiliation, as well as entrapment.

Consumer Credit

Implications for clients and staff: Individuals experiencing acute financial hardship can experience suicidality at a higher-than-normal rate. Consequently, suicidality in the credit management environment is likely to be more prevalent than elsewhere. This presents an opportunity, and some may argue, duty-of-care to support suicidal clients. But on the subject of suicidality in the credit management environment, the client is not the sole concern. It’s clear from the above, that those working in the field of credit management are likely to be exposed at higher-than-normal-occupationallevels to client suicidality. The question, sadly, is likely not if such exposure will occur, but when. There is a strong evidencebased reason to carefully consider the impacts of that likely exposure on staff. Recent research into the

“It is well recognised that there are several cognitive stages that precipitate suicide. These include defeat and humiliation, as well as subsequent experience of a sense of entrapment. Financial hardship can heavily impact these thought processes...” effect of exposure to the suicidality of others on emergency service workers found that there is evidence that higher-than-normal-occupational levels of exposure can lead to suicidal thinking and behaviour in the individual. It’s highly likely the observed relationship between occupational exposure and suicidality extends beyond occupational borders. Thus, the credit management industry should consider the establishment of processes to safeguard not only clients, but also credit management employees.

Solutions: Fortunately, the basic skills to help save a life from suicide can be learnt. Mental health literacy, familiarity with warning signs, and knowledge of how to apply basic safety measures to those experiencing suicidality are all acquirable skills: A range of training programs, including several offered by Lifeline, are available for that purpose. Importantly, those programs are not designed to teach clinical skills. There is no expectation that employees can or should be diagnosing people, nor that they become counsellors. ➤

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Consumer Credit

Rather, people acquire basic but potentially lifesaving skills. They learn how to recognise warning signs like hopelessness about the future. They learn the importance of asking the question, ‘are you considering ending your life?’ and importantly, how to listen without judgement. Finally, they learn how to safely refer someone to further support when it is needed. Not only do the skills acquired through training equip individuals to help safeguard the lives of others, but they can also help the individual recognise and respond to their own mental health needs. In operational terms, organisations operating within the credit management industry have the opportunity to embed mental health and suicidality training programs into their onboarding processes. But, like any skills, the ability to assist someone in distress can diminish over time. Lifeline recommends that careful consideration be given to including ongoing training as part of an organisation’s professional development approach. Via these means amongst others, the credit management industry can move towards better serving the needs of both clients and staff with respect to mental health and suicidality. Lifeline has a vision of an Australia free of suicide. It is a vision that can only be realised with a whole-ofcommunity approach. And it is one in which the credit management

industry has the opportunity to play an important, impactful, and longlasting role. If you, or someone you care for, is considering ending their life, please call Lifeline on 13 11 14 (24 hours / 7 days) or chat to a Crisis Supporter online at lifeline.org.au (7pm – midnight, every night)

Approaching collections & vulnerability as an energy retailer – Rosemarie Price Ergon Energy Retail is an electricity retailer that operates in regional Queensland and is governed by the National Energy Retail Law and Rules, as well as by the Australian Energy Regulator. We are a Queensland government owned corporation and as such, the Queensland government is our primary shareholder. Our customer base is diverse and geographically covers coastal cities as well as remote rural communities, and includes residential, commercial, farming, mining and manufacturing customers. During 2017, our debt collection activities for customer segments of residential and small business were targeted for a revamped approach. This approach had, as its core principle, to establish a more informed relationship with these customer groups. This translated to being able to understand the financial and circumstantial

“In operational terms, organisations operating within the credit management industry have the opportunity to embed mental health and suicidality training programs into their onboarding processes. But, like any skills, the ability to assist someone in distress can diminish over time.” 30

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vulnerabilities of these customer segments through more respectfully conducted, in-depth conversations, that previously had not been broached. Key to this understanding was to acknowledge that, being exposed/vulnerable to unpredictable life circumstances (such as loss of job, family violence, physical and mental illness), can surface in a range of ways, one of which is the inability to pay essential utility bills, and that this interaction needs to be managed in an empathetic and balanced way. This change in debt collection approach was championed by senior management in response to unfavourable trends in complaints relating to credit matters and collection efficiency metrics, such as days sales outstanding. There were a number of core changes made. Resetting the purpose of our collection teams was paramount in this revamped approach- we expanded our focus to include both short- and long-term outcomes, particularly longer term payment plan effectiveness. To enable this longer-term focus and a higher degree of flexibility, the financial authority levels and payment plan timeframes for Credit Relationship officers were increased. The key target outcome was to make a difference in our customers lives with regards to the management of this essential service utility bill. A further critical change was the renaming of the team members to Credit Relationship Officerspreviously being called Credit Collection Officers. This conveyed a strong message as to our core goal, which was to establish a relationship with customers. To ensure our teams had full understanding and capabilities to outwork this engagement model, specialist training consultants were engaged to develop the optimal Call Quality Framework, including

Consumer Credit

“The measures of success for us are improved Days Sales Outstanding outcomes, improved Call Quality scores by agents plus above average Voice of Customer satisfaction scores by the Credit Relationship teams. Further measures of success are that staff are confident and feel very well supported in managing the customer situation.” call flow scripting and call quality assessments that covered a broad range of aspects ranging from empathy to regulatory requirements. To complement this framework, additional Quality Management Officers were provisioned to conduct on-going coaching and mentoring of credit relationship officers. These Quality Management Officers, as well as Team leaders, formalised their coaching and quality assessments skills through completing accredited certification. A formalised component of this Quality framework is the availability of debriefing sessions for the officers either with managers, Quality Management Officers, or with peers. For particularly stressful interactions such as self- harm/ suicidal threats, community threats, business management threats, further support is provided via our Corporate employee counselling services. This support mechanism has been instrumental to building and maintaining personal resilience capabilities of the Credit Relationship team members. Since the implementation of the revamped approach, the Credit Relationship team dynamics has improved materially, with anecdotal evidence indicating that team members are very aligned with the benefits of the consistency of this approach and advise of greater satisfaction in being able to tailor

solutions to customers specific circumstances. Post call evaluations by customers of the service provided by the Credit Relationship officers have yielded strong results for attributes of empathy, understanding of situation, listening and providing helpful solutions in a timely manner. Ongoing improvements continue to be implemented to this framework as legislative and operational opportunities present. Overall, the understanding, accepting and recognising of customer vulnerabilities and adapting our practices accordingly, by balancing commercial requirements and circumstantial realities, has been the basis of our renewed approach to credit collection. The measures of success for us are improved Days Sales Outstanding outcomes, improved Call Quality scores by agents plus above average Voice of Customer satisfaction scores by the Credit Relationship teams. Further measures of success are that staff are confident and feel very well supported in managing the customer situation; that customers feel that we care and are in tune with their circumstances.

Conclusion Sometimes the topic of vulnerability can seem overwhelming and it is easy to think ‘well really, what can I do? I’m just one person/one

organisation, this is a bigger issue’. Liana Papoutsis, who heads up the specialised family violence training at eMatrix, often shares her lived experience of family violence to provide more context to the training, and in doing so stresses to never underestimate the difference you can make in somebody’s life. It is important for all of us working in credit to remember that. We are not expected to be counsellors or experts, but it is about doing what we can within our individual roles and doing those to the best of our ability. With the right support from Leaders and a dedicated approach to training, we can all move beyond awareness to real and improved outcomes for everyone.

Jodie Bedoya Director of eMatrix Training, Collections & Vulnerability Training Specialists Ph: 0438 391 500 Email: jodieb@ematrixtraining.com.au www.ematrixtraining.com.au Anna Brooks National Manager Lifeline Research Foundation Email: anna.brooks@lifeline.org.au Rosemarie Price Manager Retail Credit & Receipting Ph: 07 4932 7230 Email: rosemarie.price@energyq.com.au Nikki Dennis MICM Consultant eMatrix Training Ph: 0437 652 562 Email: nikki@ematrixtraining.com.au You can follow her on linkedin.com/in/nikki-dennis

“We are not expected to be counsellors or experts, but it is about doing what we can within our individual roles and doing those to the best of our ability.”

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Consumer Credit

Predatory loans - A buzz-phrase or a valid concern for Aussie battlers? By Clare Venema*

Australians have borrowed more than 3 billion dollars from payday lenders between 2016 and 2019 alone.1 Commonly used in times of financial distress, payday loans provide borrowers with instantaneous cash, usually in relatively small amounts, and loans are often granted within 24 hours of the borrower’s application. A report compiled by consumer advocacy groups have deemed payday loans as predatory in nature, with Australian battlers falling victim to crippling interest, and the aggravation of already accumulating debts. However, one might say that common sense should prevail in the minds of borrowers before entering into such arduous agreements. Or is it, that these lenders are praying on those in financial distress? As the saying goes, desperate times call for desperate measures, and the 550 million dollar profit made from these lenders in the past three years is a clear measure of the times.2

The victim demographic

Clare Venema

Broadly speaking, people who opt for payday loans are “those doing it toughest in society.”3 There is a growing group emerging who are reliant on payday loans, of those with insecure employment, perhaps with higher expenses, otherwise known as the financially distressed.4 Of the 23 percent of female borrowers, 41 percent are single mothers,5 a

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cohort often characterized as doing it tough. A report compiled by the “Stop the Debt Trap Alliance” has found that the number of financially distressed households with payday loans has risen significantly, with the number jumping from 21,000 in 2010 to approximately 1.77 million in 2019.6 Research has indicated that 85.8% of these loans are generated online,7 with accessibility, expedience and consumer-targeted ads, misrepresenting payday loans as painless means to solve immediate monetary problems. To the contrary, many payday loans aren’t transparent with respect to interest rates, which can be hidden in the fees and charges that borrowers pay. Some rates have been found to be as high as 400 percent,8 which can cripple borrowers who are already in a state of financial distress.

A debt spiral It has been estimated that 15% of payday borrowers will fall into a debt spiral, which can potentially have implications such as bankruptcy.9 The insolvency profession is yet to properly gage the figures of payday borrowers entering bankruptcy, as the sharp increase in usage is relatively novel. However, lenders are still at liberty to act recklessly with no current caps on charges, so borrowers who are likely to enter into a debt spiral is only going to increase if there fails to be swift legislative intervention.

Consumer Credit

“A report compiled by the “Stop the Debt Trap Alliance” has found that the number of financially distressed households with payday loans has risen significantly, with the number jumping from 21,000 in 2010 to approximately 1.77 million in 2019.6” FOOTNOTES:

ASIC intervention

Desperate times

Following the banking Royal Commission, the Australian Government has vowed to take affirmative action in its monitoring of the financial services sector, though it doesn’t appear as though this has quite extended to payday services.10 However, ASIC has now been granted with product intervention power, and it appears as though their first target will be predatory short-term lenders.11 The key trigger-point for ASIC’s new powers, is the ability to address significant distress caused by financial products, regardless of whether they were lawfully provided.12 It follows, that the Australian Government as a whole should follow suit, by firstly, acting on the recommendations made by the 2016 Small Amount Credit Contract Review, that the Government had committed to implement over 1000 days ago.13 Furthermore, the law need to be changed, as many payday lenders are exempt from credit licensing, conduct and responsible lending obligations under the National Consumer Credit Protection Act 2009 (Cth), provided they meet certain thresholds.14

The Business Insider has stated that the Australian economy is set for its worst year since the 1991 Recession, with wages increasing so slowly that it has undermined job creation and consumption. Furthermore, the price of many of life’s necessities has climbed over the years, not to mention the debt burden created by soaring house prices. As such, it is unsurprising that Australian battlers have opted for the payday lending solution to resolve immediate credit emergencies. As mainstream credit tightens following the Royal Commission’s enquiry into the big four banks, an unintended consequence of the banks pulling out of less mainstream credit products has forced battlers into the hands of less regulated players.15 It follows, that though the regulatory powers granted to ASIC are a step in the right direction, the calls for the legislative intervention in the growing payday sector must be answered. *Clare Venema Solicitor Oakbridge Lawyers E: CVenema@oakbridgelawyers.com.au T: 61 8 7078 0377

2 3

4 5 6

11 12 13 14

Sarah Martin, “More than 30,000 payday loans targeting the financially vulnerable taken out each week”, The Guardian, (Australia), 12 November 2019, https://www.theguardian.com/ australia-news/2019/nov/12/more-than-30000-paydayloans-targeting-the-financially-vulnerable-taken-outeach-week Ibid. Katri Uibu, “Millions of Australians falling victim to predatory payday lenders, report shows”, ABC News, (Australia), 12 November 2019, https://www. abc.net.au/news/2019-11-12/payday-loans-increasingsingle-mums-growing-borrowing-sector/11694908 Ibid. Ibid. Benita Kolovos, “Payday loans victimise millions of Aussies”, Perth Now, (Australia), 12 November 2019, https://www.perthnow.com.au/business/paydayloans-victimise-millions-of-aussies-ng-s-1978978 Sarah Martin, “More than 30,000 payday loans targeting the financially vulnerable taken out each week”, The Guardian, (Australia), 12 November 2019, https://www.theguardian.com/ australia-news/2019/nov/12/more-than-30000-paydayloans-targeting-the-financially-vulnerable-taken-outeach-week Katri Uibu, “Millions of Australians falling victim to predatory payday lenders, report shows”, ABC News, (Australia), 12 November 2019, https://www. abc.net.au/news/2019-11-12/payday-loans-increasingsingle-mums-growing-borrowing-sector/11694908 Sarah Martin, “More than 30,000 payday loans targeting the financially vulnerable taken out each week”, The Guardian, (Australia), 12 November 2019, https://www.theguardian.com/ australia-news/2019/nov/12/more-than-30000-paydayloans-targeting-the-financially-vulnerable-taken-outeach-week Stephen Letts, “ASIC set to take action against predatory lenders”, The New Daily, (Australia), 12 September 2019, https://thenewdaily.com.au/money/ finance-news/2019/09/12/asic-payday-lenders/ Ibid Ibid Ibid Sarah Martin, “More than 30,000 payday loans targeting the financially vulnerable taken out each week”, The Guardian, (Australia), 12 November 2019, https://www.theguardian.com/ australia-news/2019/nov/12/more-than-30000-paydayloans-targeting-the-financially-vulnerable-taken-outeach-week Stephen Letts, “ASIC set to take action against predatory lenders”, The New Daily, (Australia), 12 September 2019, https://thenewdaily.com.au/money/ finance-news/2019/09/12/asic-payday-lenders/

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Ripple effect of the new Banking Code of Practice to Debt Collectors By Georgina Wu* If you think the new Banking Code of Practice only affects the banks, think again! The code has far wider reach than the banking industry and may even lead to amendments to the Bankruptcy Act, causing ripples in the debt collection industry. The Banking Code of Practice 2019 (‘Code’) commenced on 1 July 2019. It is the first banking code considered and approved by ASIC. The Code is not compulsory upon the banks and it is up to the individual banks to adopt it. At present, 25 banks including all major banks have voluntarily adopted the Code.

Chapter 43 of the Code sets out requirements which the banks must adhere to when recovering debts. Of significance for the debt collection industry, paragraph 182 of the Code requires a bank to only sell a debt to a third party who has agreed to comply with the ACCC’s and ASIC’s Debt Collection Guideline: For Collectors and Creditors (‘Debt Collection Guideline’) and the Department of Human Services’ Code of Operation: Recovery of Debts (‘Code of Operation’). The Debt Collection Guideline and the Code of Operation are non-legally binding statements of practices. They will only have legal effect if a party contractually agrees to adhere to their provisions. The effect of paragraph 182 of the Code is to give the Debt Collection Guideline and Code of Operation a legally binding effect upon those who undertake recovery of bank debts.

Industry Guideline: Sale of unsecured debt

Georgina Wu

On 19 November 2019, the Australian Banking Association (‘ABA’) released its Industry Guideline: Sale of unsecured debt (‘Industry Guideline’) to complement the Code. The Industry Guideline will commence on 1 March 2020 and is intended to provide additional safeguards for debtors when banks sell unsecured

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debts to another party. The following provisions of the Industry Guideline operate beyond the banking industry and extend into the debt collection industry: z Banks are asked to consider how to include aspects of the Industry Guideline in their contractual arrangements with debt buyers. z Banks should include the following minimum selection criteria for debt buyers in their policies: { debt buyers are required to agree to comply with the Debt Collection Guideline and Code of Operation; { debt buyers are required to be customer-focused and the member bank’s corporate values and those of the debt buyer need to align; { banks are to audit their debt buyers; { banks are to reassess their relationship with debt buyers if there is significant evidence of a misalignment between the bank’s corporate values and the behaviour of the debt buyer; { debt buyers are required to agree to comply with ASIC Regulatory Guide 165; and { debt buyers are required to be members of the Australian Financial Complaints Authority or another external dispute resolution scheme.

Consumer Credit

z Banks are required to have processes in place to monitor how debt buyers are undertaking their collection activities when contracting with debt buyers for the sale of unsecured debt, these processes should include the following minimum mandatory reporting: { Volumes of and types/nature of complaints and targeted audit (by the bank) of complaints handling. { The volume and types of actions being taken by the debt buyers including litigation, enforcements (specifying the number and type of action such as sequestration orders, garnishee orders, charging orders, instalment orders, writs of possession of goods, writs of possession of property etc.) and bankruptcy applications. { Results of annual audits to ensure compliance with regulatory and contractual obligations. { Results of due diligence activities (e.g. internal and/or independent audits customer surveys/NPS, internal quality control) undertaken to meet and monitor compliance with regulatory and contractual obligations. z When a debt is sold, the bank is required to provide the debt buyer with a copy of the following documents within 30 days of request from the debt buyer: { The entire contract under which the debt arose. { Statement of account evidencing outstanding debt. { Details of any hardship arrangements in the preceding 12 months. z If a debt buyer believes that commencing bankruptcy proceedings is necessary to recover the debt, the debt buyer will be required to consult with the banks prior to

commencing these proceedings. The debt buyer is required to explain to the bank why they believe bankruptcy is the most appropriate option and what they know about the customer’s circumstances. If the bank identifies a vulnerability, the banks have the option to buy back the debt from the debt buyer. The Industry Guideline has provided the following examples of circumstances: { elderly debtor { debtor suffering from a form of financial abuse { a debtor who is homeless { a debtor who is terminally ill { a debtor who has a serious disability or mental illness. The banks are required to determine and document their own appropriate threshold amount of unsecured debt for the purposes of commencing bankruptcy proceedings for inclusion in their contractual arrangements with the debt buyers. The Industry Guideline is suggesting that banks should set a higher threshold amount than the statutory minimum of $5,000. If a bank becomes aware that a debt which has been sold to a debt buyer involved family and domestic violence, the bank is required to work with the debt buyer to provide the best outcome for the customer, including repurchasing the debt. Banks need to ensure that debt buyers protect identified scheme payments under the National Redress Scheme (payment for people who have experienced institutional child sexual abuse) and not to use these scheme payments to repay bank debts, unless the debtor wishes to do so. For example, garnishee orders cannot be issued against these scheme payments.

What this means for the debt collection industry The effect of the Industry Guideline upon the debt collection industry can be summarised as follows: z a number of voluntary practices and guidelines will become legally enforceable upon third party collectors; z third party collectors will need to follow the bank’s collections policy; z third party collectors will be subject to more mandatory reporting requirements and auditing by the banks; z banks will need to be consulted prior to commencing bankruptcy proceedings; z banks may impose a higher minimum threshold debt than the statutory minimum of $5,000 which third party collectors are required to adopt before bankruptcy proceedings may be commenced; z care needs to be taken when issuing garnishee notices to exclude scheme payments under the National Redress Scheme; and z debts may be repurchased by the banks.

Changes to the Bankruptcy Act As part of the Industry Guideline, the ABA along with a number of other bodies have written to the Federal Attorney General requesting a review of the current statutory minimum threshold of $5,000 for triggering bankruptcy proceedings. If they are successful in lobbying the government, the minimum threshold could be set to a much higher amount. The end result of a threshold increase will mean small debts will be harder to enforce as bankruptcy proceedings would not be available. *Georgina Wu MICM Special Counsel TurksLegal Email: georgina.wu@turkslegal.com.au Ph: 02 8257 5786

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Economic Update

2020 economic outlook – low and slow By Nicki Hutley*

The Global picture In 2020, Australia continues to face a tough global economic environment with a plethora of rising risks. Trump’s trade wars and China’s resulting growth slowdown are at the forefront, but there are plenty of other minefields to be navigated; not least, Brexit, heightened economic and political troubles in Europe, as well as Hong Kong, the Middle East and Kashmir. Yet, even while global growth has continued to slow and forecasts continue to be downgraded, thus far at least, growth is not markedly below trend. Most critically for Australia, our

trading partner growth remains at reasonably healthy levels by historic standards. Indeed, somewhat paradoxically, Australia has benefitted from slower growth in China over the past year or so as the Chinese Government has ramped up fiscal stimulus through its infrastructure budget, helping lift Australian iron ore prices and volumes. This has helped produce the first current account surplus in Australia in more than four decades. Global momentum is clearly headed in the wrong direction, however, and China will not be able to keep its foot on the fiscal accelerator

GDP and Inflation in Australia’s major trading partners

Source: Deloitte Access Economics

Nicki Hutley

“Most critically for Australia, our trading partner growth remains at reasonably healthy levels by historic standards.”

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Economic Update

for much longer, should trade negotiations fail again. Against the increasing global economic uncertainty, there has been a loss of confidence in the ability of political leaders to address economic and broader issues. So businesses have wound back investment plans while consumers become ever more cautious. This lack of confidence, coupled with persistently low wages and inflation, can be expected to lead to more action from Central Banks in 2020. Indeed, there are clear signs that so-called “unconventional” monetary policy is making a comeback, alongside lower official interest rates. But will this be enough to keep the wolf from the door? Organisations such as the IMF think not, becoming increasingly vocal in their call for fiscal stimulus to help turn the tide.

Weighted average short- and long-term interest rates in the G4

Source: Deloitte Access Economics

GDP growth (change on year earlier)

Australia in 2020 Australia’s record 28 years of growth is something of a modern economic miracle, but 2019 has seen GDP growth fall to insipid levels, and our economy now faces its biggest challenge since the Global Financial Crisis. The key headwinds for Australia in 2019 have been a cyclical downturn ➤

Source: Deloitte Access Economics

Private Dwelling Investment*

Household Income and Consumption*

Source: ABS

Source: ABS; RBA

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Economic Update

in housing construction, sluggish consumer spending in the face of low wages growth and – until recently – falling house prices, as well as insipid business investment. A record period of drought has exacerbated an already fragile economy. Alongside export growth, Australia’s economy has been kept afloat over the past year largely by governments’ spending on infrastructure – mainly in NSW and Victoria. Without these two critical components, our economy would have headed backwards in FY2018-19. So what does 2020 hold in store? The answer is: it depends. Consumer demand is the largest slice of Australia’s economic pie by a large margin – around 60 per cent of it. In the face of two interest rate cuts and a tax rebate, consumers remain bearish, preferring to pay down debt instead of spend. This might be good news for future spending, but it’s not helping us right now. And while the Prime Minister is correct in saying we are not at “DEFCON 1”, we need action well before we get there: if we’re at DEFCON 1 then it’s too late. We need, and can expect, further action from the Reserve Bank on monetary policy in the months ahead. The RBA has been clear that interest rates will remain low for a prolonged period – probably years. And it has also signalled that it stands ready to cut rates again; indeed, it came close to doing so in November but will probably now wait until February, when we have had a further read on employment and consumer demand. This will help – at the margin, including by keeping the Aussie dollar at competitive levels. But it is unlikely to be enough on its own to have a major impact on GDP. Recent easing up of lending regulations by the Australian Prudential Regulatory Authority for housing investment is also having some positive effect on house prices,

Contributions to GDP Growth

Source: ABS; RBA

“In the face of two interest rate cuts and a tax rebate, consumers remain bearish, preferring to pay down debt instead of spend. This might be good news for future spending, but it’s not helping us right now.” which in turn are helping consumer confidence, albeit also at the margin. And with slow wages growth set to continue through 2020, it’s hard to see how rising prices can be sustained, even if they are not reversed. The Federal Government has also announced the bring-forward of some infrastructure investment. While welcome, $1.8 billion over 18 months will be marginal in its impact. And any impact on productivity from this spend is years away. And despite this spend, as long as the government continues to move towards a Budget surplus, its overall stance is contractionary.

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

The key to the economic outlook in 2020, barring global shocks, lies in lifting household incomes and confidence. Lifting the Newstart allowance, bringing forward tax cuts for low and middle income earners, and productivity deals are possible options. But don’t hold your breath. Growth in 2020 is likely to remain low and slow; but that is better than the alternative of a recession.

*Nicki Hutley Partner Deloitte Access Economics Email: nhutley@deloitte.com.au Ph: 02 9322 7076

Leadership and High Performance

Credit professionals under pressure AICM Conference 2019 By Robyn Erskine, Jeff Hurst, Eva Tsahuridu and Tim Timchur*

Robyn Erskine

On a warm and balmy Gold Coast afternoon Credit Professionals gathered from around the country to share stories, rekindle friendships and hear from a series of experts drawn from many different and varied areas. The AICM conference is always the place to be for the Credit Professional seeking to stay at the top of their game. However, like many credit professionals know what starts as a bright and sunny day can quickly change. Storm clouds can come from nowhere and we were all treated to a spectacular tropical storm that Queensland is famous for. Into this setting a panel of experts lead by Robyn Erskine well known Insolvency Practitioner from Brooke Bird and Victorian/ Tasmanian Councillor spoke to a full auditorium of Credit Professionals about the importance of being able to weather their own storm – an ethical storm – the type of storm

Jeff Hurst

Tim Timchur

that all people find themselves facing from time to time. One may well ask what could an Insolvency Practitioner bring to the discussion on ethics. The idea for this session emanated from Robyn’s commitment to ethical behaviour which she pursues by Chairing the Ethics Taskforce for the International Federation of Accountants Small and Medium Practices Committee and the work she has done in this field with the various professional bodies including ARITA, CPA Australia and the National Standard setter the Accounting Profession Ethics Standards Board. Robyn believes that ethical behaviour underpins the trust that the public needs to have in all professions. She could also see how at times the Credit Professional is pulled in many different directions by people wanting them to do something whilst maybe not illegal is still not quite right and wanted to share with attendees when faced

Eva Tsahuridu

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Leadership and High Performance

Robyn Erskine (Brooke Bird), Jeff Hurst (Trade Bureaux Australia), Tim Timchur (365 Architects) and Eva Tsahuridu (RMIT).

“It seems all too common the credit professional is pressed by someone to do something they probably shouldn’t or is pressed to keep mum about something.” with such predicaments strategies on identifying and dealing with this type of behaviour. The panel spoke about the importance of ethical behaviour, the role it plays in shaping an organisations culture and how even good people can be trapped into behaving badly. Jeff Hurst a veteran of the credit world, a former President of the Victorian Tasmanian Council, former director of AICM and a life member shared experiences based on his own personal journey and those of his many colleagues which had many in the room nodding. It seems all too common the credit professional is pressed by someone to do something

they probably shouldn’t or is pressed to keep mum about something. Be it a salesperson putting through phantom orders in a bid to meet month end targets only to cancel them days later, or pressure to keep an account open for a customer who is well outside of terms, the credit professional is placed in these unenviable positions all too often. Associate Professor Dr Eva Tsahuridu from the RMIT University, a well-respected ethicist who speaks publicly about the importance of ethical behaviour discussed the trap that sees good people ending up doing not so good things. Dr Tsahuridu said one of the biggest issues for unethical work conduct is

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

good people behaving badly. Often this is because the people putting the pressure on start out seeking “just a favour” or it is “just this once”, either trivialising what is being sought, or normalising the behaviour, making it seem nothing out of the ordinary “everyone does this” or in circumstances where their requests are rebuffed by suggesting the person is “not a team player”. Then of course there is the guilt trip, making the Credit Professional feel that if they don’t play along something terrible will happen to the other person e.g. “but I need my commission (on sales) to pay my mortgage…keep a roof over the heads of my family….we’ll be out on the street….my wife/husband will leave me….” Dr Tsahuridu alerted attendees to this type of behaviour and that in these circumstances by allowing yourself to be manipulated or coerced you can end up being involved in

Leadership and High Performance

“Dr Tsahuridu acknowledged it takes moral courage to stand true to your ethical beliefs however if you do, eventually colleagues will expect nothing less of you and being put in a position of an ethical quandary should diminish.” behaviour that if you sat and thought about it would be against even your own values. Dr Tsahuridu acknowledged it takes moral courage to stand true to your ethical beliefs however if you do, eventually colleagues will expect nothing less of you and being put in a position of an ethical quandary should diminish. Sadly, though she acknowledged, that in some organisations the culture is so poor, the value on ethical behaviour so low, that to stay with those organisations becomes impossible as it places the person under great risk and stress. No conversation on ethics and ethical behaviour would be complete without some mention of the lessons from the Hayne Royal Commission. Tim Timchur a governance expert and a nonexecutive Director of the Governance Institute of Australia and Managing Director of technology company 365 Architects, discussed the importance of setting the tone from the top with the board of any organisation actively being seen to embrace and support ethical behaviour and that by doing so the importance of ethical behaviour permeates the culture running through the whole of the organisation. He said this could be done by ensuring sound corporate governance principles are followed. Broadly an organisation in Mr Timchur’s view should be transparent and consistent in its dealings, ensuring there is clarity around how decisions are made, have clear processes in place so

that people know what they can and cannot do and have the right people in the right positions to make those decisions. There also needs to be clear consequences for people who fail to follow the protocols or embrace the standards of behaviour set. Having a formalised risk management framework to identify areas of risk within the business or areas where things could be open to manipulation and having policies and procedures that mitigate the opportunity for unethical behaviours or actions to be carried out was imperative. The panel discussed that being put in a position where a person is placed in an ethical bind is a period of great stress. Not only can it lead in the worst-case scenario to criminal proceedings being brought against the perpetrators, but even in lesser matters it can have grave consequences on a person’s career prospects and on their own personal wellbeing. Mr Timchur said organisations had a duty to ensure the safety and well being of employees and spoke about the importance of having a

whistle blowing process in place. The panel agreed employees are one of the important stakeholders in an organisation and companies that embraced an ethical culture provided a much more harmonious workplace environment which can be a very positive attribute for attracting and retaining one of the most valuable assets of the business – the staff. The time allocated for the session went as fast as the afternoon storm, attendees were left with a lot to ponder, but they were left with a sense of unity that all of us face ethical dilemmas every day. They also left with a new-found awareness of how to ensure you don’t become a victim of unethical behaviour or caught in an ethical trap. Attendees left armed with the fortitude to exercise the moral courage it takes to stand one’s ground.

Robyn Erskine MICM Partner Brooke Bird Email: rerskine@brookebird.com.au Eva Tsahuridu Associate Professor and Industry Fellow at the School of Accounting RMIT Email: eva.tsahuridu@rmit.edu.au Tim Timchur Director, Consultant, Advisor 365 Architects Email: tim.timchur@365a.com.au Jeff Hurst LICM CCE Director Trade Bureaux Australia Email: jeff@tba.net.au

“The panel agreed employees are one of the important stakeholders in an organisation and companies that embraced an ethical culture provided a much more harmonious workplace environment which can be a very positive attribute for attracting and retaining one of the most valuable assets of the business – the staff.”

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Insolvency

Overview AICM conference insolvency debate 2019 “An unfair preference claim is a sign of a highly functioning credit team and should be included as a key performance indicator” By Andrew Spring* In the spirit of “serious” light heartedness, the NSW “Blues” team [Natalie Ledlin, Ledlin Lawyers (last year’s carry over champion) and Peter Moore, Jirsch Sutherland Sydney] and the QLD (“Maroons”) team [Mark Harley, Boss Lawyers and Chris Baskerville, Jirsch Sutherland Brisbane], faced off in this year’s annual AICM conference insolvency debate, on a topic that is sure to draw a comment from any credit professional – Unfair Preference claims. Whilst some of the magic may be lost in my summation, please try to imagine the vigorous nature of the delivery of each argument both in favour and against the proposition, with each team knowing that their state’s pride was on the line.

Andrew Spring

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

After entering to handpicked team theme songs, the gladiatorial contest ensued. And while the audience was warned, like a first time witness to the games at the Roman Coliseum some 2000 years ago, it was hard not to be shocked by some of the metaphorical blood shed that followed, from each debater. Before detailing the gruesome battle that erupted, let us first consider the basis for the proposition. Section 588FA of the Corporations Act 2001 (as amended) defines an Unfair Preference to be: (1) A transaction is an unfair preference given by a company to a creditor of the company if, and only if: (a) the company and the creditor are parties to the transaction (even if someone else is also a party); and (b) the transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes to the creditor, more than the creditor would receive from the company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company; [our emphasis added] But where and why was this piece of legislation introduced? Introduced in Australian corporations’ law in 1986, conceptually the law of preferences has existed since the Fraudulent Conveyances Act 1571, an Act of Parliament in England. The concept of a preference was established to discourage a “rush for the door” mentality by creditors at the first sign of distress. And by rush for the door, perhaps a truer meaning was a “rush for the cudgel”. It is the intention in an insolvency event for creditors to be treated equally, often termed pari passu (on equal footing). The concept of a voidable preference payment is part of the enforcement rights to protect this principle. However, perhaps more

Insolvency

Chris Baskerville (Jirsch Sutherland), Mark Harley (Boss Lawyers), Peter Moore (Jirsch Sutherland) and Natalie Ledlin (Ledlin Lawyers) importantly, it may be that the concept of a preference was designed to protect something more primary; a debtors physical wellbeing and therefore their ability to continue to contribute to society post a sign of financial distress. It may be that this concept was the beginning of the move towards a “business rescue” cultural shift. Now back to the debate. The Queensland Maroons, arguing for the negative, enthralled the audience with chants of “Queens-lan-der! Queens-lan-der!” whilst casting visions of Chris Baskerville in green tights as some rotund version of Robin Hood! Their use of toilet analogies, saw a point deducted by the referee, but they were throwing off the gloves to make their argument. The basis of their argument was built around the term “fair”. How can it be “unfair” to be paid for money that is owed? How can it be “fair” to repay monies to a Liquidator that have been successfully recovered through the creditor’s hard work? How can credit professionals ever define high performance by having Liquidators issue demands for repayment of unfair preferences? And if the creditor has very limited knowledge or control of an impending insolvency, then how could it be “fair” to build a KPI that presumes to rely upon an outcome that their role specifically attempts to avoid? Playing to the emotional response of receiving a preference claim, rallied significant support. The NSW Blues, being staggered but not beaten, accepted the challenge. They calmly absorbed the barrage of questions and cringe worthy descriptions and set about unravelling the answers. With the helpful use of visual aids, including a Jerry Maguire cameo, they made the following arguments. In isolation, the repayment of monies owed to a creditor via the unfair preference regime, feels unfair. However, considered in a more global context, credit professionals

should indeed shift their views on receiving the Liquidator’s claim. It is an endorsement of the effectiveness of the credit team’s culture of success, systems and processes that they have elevated themselves above other creditors at a time when the debtor is under financial distress. Kind of like being picked first for the cricket team at school; the credit team has built and maintained relationships, demonstrated expertise and technique and created just enough fear not to be ignored. After all, anyone can collect money from a solvent debtor. In addition, NSW argued (albeit with some blatant selfpromotion), that when considering the cash flow benefits to the creditor’s business, the availability of defences to resist a Liquidator’s claim through the savvy advice of the appropriate professional adviser, it was unlikely that the full amount of the recovered debtor payment would ever be repaid to the Liquidator. As such, even if a contribution to the settlement of a preference demand is required at some later date (which can be years after receiving the payment), the credit team are still likely to have secured an early dividend for their business from an insolvency event. Bearing in mind that over 90% of Liquidations do not have sufficient realisations to pay a dividend greater than 10 cents in the dollar, the likely outcome of a preference will still result in a greater return for the creditor, therefore proving that the credit team are high performing! The audience, appreciative of the efforts of both teams, awarded the win to the NSW team, helping Natalie go back-to-back – Congratulations! We look forward to seeing you all again next year. *Andrew Spring MICM Partner Jirsch Sutherland Ph: 1300 265 753

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Insolvency

Plugging loopholes By Robert Naudi RITP, CA, MICM* The Appointment of a Voluntary Administer where a Winding up Application is on Foot. A proposed solution to the concerns surrounding such a practice. It is not uncommon for directors to delay seeking advice until a winding up application1 has been commenced and so the last mechanism to prevent the company entering liquidation is appointing a Voluntary Administrator. A petitioning creditor, when making the winding up application, will in almost all instances present a signed consent to act from their nominated liquidator. The choice of liquidator is governed by the market considerations of experiences, reputation and price. For the director of the debtor company, there are few options. The precondition to a winding up application is the failure to comply with a Statutory Demand giving rise to a statutory presumption of insolvency. The creditor has 3 months within which to rely on that statutory presumption and make the winding up application. The limited options then available to the debtor company are to: 1. Seek an adjournment of the winding up application and/or oppose the making of a winding

Robert Naudi

up order. In doing so, the debtor company must provide good reasons why the order should not be made and why an adjournment should be granted. This paper does not address what is specifically required for these options other than to say that a company which is not legally represented is likely to fail and proof of solvency underpins any application. 2. Appoint a Voluntary Administrator before the hearing date. The Voluntary Administrator must file an affidavit setting out good reasons why it is in the interests of creditors for the hearing to be adjourned. This ought to include details of a proposed Deed of Company Arrangement (“DoCA”) and verified information that a DoCA would provide creditors with a better outcome than liquidation. There is generally a great deal of skepticism around Voluntary Administrators being appointed when a winding up application is already

“A petitioning creditor, when making the winding up application, will in almost all instances present a signed consent to act from their nominated liquidator.”

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Insolvency

“There is generally a great deal of skepticism around Voluntary Administrators being appointed when a winding up application is already on foot. The Courts look carefully at the timing of placing a company into Voluntary Administration in order to avoid the liquidation.” on foot. The Courts look carefully at the timing of placing a company into Voluntary Administration in order to avoid the liquidation. If the Court decides to allow the Voluntary Administration to proceed, it generally does so on conditions which involve adjourning the hearing (but only until a draft report is prepared by the Administrator) or until after the second meeting of creditors has voted on the proposed DoCA. In more recent cases, the ATO (as the applicant creditor) has sought an adjournment to a date before the finalisation of the Section 439A report and will then seek a draft of the report prior to it being issued to creditors. If satisfied with the report, a further adjournment will be sought by consent and if not, the ATO will press for immediate liquidation. The wind up lists provide opportunities for some insolvency practitioners to identify target companies to offer solutions to their directors. This is aside from the pre-insolvency advisers who also review the lists for their next client. While some players may or may not operate with the best

of intentions, the solutions range from placing the company into Voluntary Administration, dealing directly with the plaintiff or dealing with the assets under potential phoenixing arrangements. At the time of writing, phoenix activities in Australia are under a multipronged attack and while not the direct focus of this paper, the issue at hand does relate to some aspects of phoenixing and the perception, real or otherwise, of underhand practices. It is worth noting that the preinsolvency arena is under review with draft proposals currently circulating as

to how to deal with these unregistered advisers prowling in the shadows, looking for an easy target. For the purpose of this paper, I do not seek to differentiate between an ethical insolvency practitioner and a preinsolvency advisor.

The Actions of Directors When facing a winding up application directors are more vulnerable to poor advice and are willing to take greater risks. That said, when directors appoint a Voluntary Administrator at such a late stage, it is often questionable as to why that action was not taken

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Insolvency

earlier and on what basis the directors selected the specific Voluntary Administrator. It has been a long standing concern of creditors as to the true independence of any practitioner selected by the directors, even where no winding up application is on foot. As an insolvency practitioner, I have no issue with the directors appointing Voluntary Administrators as they see fit given they are the minds of the company and do so in the interest of creditors, shareholders and themselves. I do however harbor an element of doubt as to motives when an application to wind up is already on foot. There is a perception that directors “shop for a desirable outcome”. It is suggested they do so to avoid losing control over the process or lose the protection afforded to them under the corporate veil as they may see that protection lifted and their personal wealth attacked. Assuming an ethical practitioner will not recommend a Voluntary Administration unless it is the best option, the director may, out of desperation, keep searching until he or she finds a complicit practitioner for the right price.

The Actions of Legal Practitioners where a Winding Up Application is on foot It is well known by ASIC and AFSA that there are certain lawyers who cold call companies listed in the Court winding up lists to offer a free meeting to discuss their options. Those lawyers invariably refer those

“Importantly, the most common way these practitioners will make money is to either request a consulting fee up front (which creates a conflict precluding them from being appointed as Voluntary Administrator), or they recommend Voluntary Administration which may not be in the best interests of the company.” companies to a range of insolvency practitioners. It is not uncommon for these lawyers to then prepare the DoCA and advise the insolvency practitioner. While this does not appear on its face to create a conflict of interest for the lawyer, nevertheless by creating an incentive for the lawyer to advise the company to appoint a certain insolvency practitioner on the premise the lawyer will then be engaged by the insolvency practitioner for commercial gain, the situation certainly raises questions as to the independence of the lawyer and the insolvency practitioner.

The Actions of Insolvency Practitioners The insolvency profession aptly refers to insolvency practitioners that cold call offering their expertise to company’s on the Court list as “Ambulance Chasers”. Their methods vary from cold calls, to letters and emails explaining how they can save the company and even avoid the “un-pleasantries” for directors that liquidation may present. Ethical practitioners may have pro-

“There is a perception that directors “shop for a desirable outcome”. It is suggested they do so to avoid losing control over the process or lose the protection afforded to them under the corporate veil as they may see that protection lifted and their personal wealth attacked.” 46

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

active meetings but do not promise unrealistic outcomes. However, to the casual or naïve observer, it is almost impossible to distinguish between those acting ethically and those who are not. Importantly, the most common way these practitioners will make money is to either request a consulting fee up front (which creates a conflict precluding them from being appointed as Voluntary Administrator), or they recommend Voluntary Administration which may not be in the best interests of the company. The practitioner is not able to offer liquidation as an alternative as that would effectively throw away the opportunity to profit from the venture as directors cannot place a company into liquidation when a winding up application is on foot. Whether the company is placed into liquidation after the appointment of the practitioner as the Voluntary Administrator is irrelevant to this practitioner from a commercial perspective as the Voluntary Administrator usually becomes the liquidator if the DoCA is not accepted or not forthcoming. They have secured a new appointment under what could be viewed as false pretenses.

What is the Answer? The answer should not prohibit directors from at all times considering their options as to the company’s future. The directors have an

Insolvency

obligation to act in the company’s best interest. That means obtaining proper advice, even where that advice may be last minute. Any proposed changes need to: 1. Maintain the integrity of the Voluntary Administration and liquidation regime. 2. Minimise any suspicion of opinion shopping. 3. Remove any question of ulterior motives by directors, advisors and practitioners. 4. Cease the practice of chasing work opportunities under dubious circumstances, where recommending liquidation means no work and where such practices are open to abuse of the system and avoidable court costs. 5. Work seamlessly within the proposed Anti Phoenixing changes in a consistent manner. 6. Work within the ILRA (Insolvency Law Reform Act 2016 (Cth) changes introduced over the last few years. 7. Otherwise not interfere with the existing law including creditors’ rights to replace practitioners.

The Proposed Solution Where a creditor makes a winding up application and a Registered Liquidator provides the requisite consent, the defendant company

“Where a creditor makes a winding up application and a Registered Liquidator provides the requisite consent, the defendant company should be prohibited from appointing a Voluntary Administrator of their choosing.”

should be prohibited from appointing a Voluntary Administrator of their choosing. The defendant company should be able to engage any lawyer or expert of their choosing to provide advice, or may engage the consenting liquidator to explore the possibility of appointing a Voluntary Administrator. The associated costs would be paid up front and will not impact the future appointment of a Voluntary Administrator or Court appointed Liquidator. The acceptance of the interim engagement would be disclosed to the petitioning creditor, any supporting creditors and the Court, and where necessary, a short adjournment should be sought from the Court to facilitate the review. Once advice is received, only the consenting liquidator would be permitted to assess the suitability of a DoCA. If the consenting liquidator is of the opinion there are adequate grounds to have the company enter into Voluntary Administration they should prepare the reasons for their opinion by affidavit for submission at the next hearing date. The affidavit would be provided to the Court, the petitioning creditor and any supporting creditors. The consenting liquidator would appear at that hearing to assist the Court in its determination. The Court would then consider the affidavit. The petitioning creditor and supporting creditors would be afforded the opportunity to make submissions and the Court would then make such orders as it thinks fit. The consenting liquidator would be required to attend and assist the Court as it requires at the cost of the Company. The consenting liquidator may either be appointed as liquidator, or if considered appropriate by the Court, be appointed as Voluntary Administrator. Following that appointment, the

“If the consenting liquidator is of the opinion there are adequate grounds to have the company enter into Voluntary Administration they should prepare the reasons for their opinion by affidavit for submission at the next hearing date.” normal rules as they currently exist would apply where creditors may replace the incumbent. Importantly, this suggested approach achieves 3 key objectives. The first being it is consistent with Insolvency Practice Statement 90-15 and does not otherwise interfere with the rights of creditors following the initial appointment, to replace the appointed Administrator or liquidator. The second being it eliminates the concerns of creditors and potential for unscrupulous activity by all concerned and the third is it further strengthens the proposals to deal with preinsolvency advisors.

*Robert Naudi RITP, CA, MICM Register Liquidator Registered Trustee Director Rodgers Reidy Ph: 08 8470 9010: Email: RNaudi@rodgersreidy.com.au www.rodgersreidy.com.au

FOOTNOTES: 1

Section 459P for an order under Section 459A of the Corporations Act 2001.

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

Unlock the potential aicm Training News in your credit career Recent graduates credit staff FNS51515 – Diploma of Credit Management

FNS40115 – Certificate IV in Credit Management

Elias Danos

NSW

Jennifer Wallace

William Rainey

NSW

Hiten Vinchhi

Jo-Anne Western

Rouruina Arama

QLD

FNS30415 Certificate III in Mercantile Agents VIC

Kim Mansfield

NSW

Statement of Attainments Melissa McPherson

VIC

FNSCRD504 Manage the credit relationship and FNSCRD503 – Promote understanding of the role and effective use of consumer credit

Andrew Gregory

VIC

BSBCNV506 Establish and manage a trust account

In House Training Woolworths – Tasmania, Scottish Pacific – Victoria, A Positive – Victoria

Unlock the potential in your credit career Consider Qualificationcourse course Consideran an AICM AICM Qualification If you aspire to achieve greater heights in your credit career or want to get the best from your credit staff, then a qualification course can help you achieve your targets. Offered nation wide, you can study in your own time (24/7), with support available. If you have industry experience or prior education, you may be eligible for Recognition of Prior Learning (RPL) credits to fast-track your qualification. If you’re an employer, you may qualify for a training grant. Talk to AICM today to discover your course options.

Diploma of Credit Management

Certificate IV in Credit Management

Certificate III in Mercantile Agents

Key credit issues such as personal & corporate insolvency, developing credit policies & compliance.

Issues relating to credit applications & securitisation, compliance, managing bad & doubtful debt & customer service.

All aspects of enforcing payment obligations & obligations of mercantile agent & debt collection activities.

Take the first step to a better career & talk to AICM today

Call 1300 560 996 or vist aicm.com.au 48

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Conference introduction

Our 2019 conference was our best yet and we were excited to welcome delegates and industry suppliers to the largest annual conference for credit professionals in Australia. After a 5 year hiatus we returned to the Marriott Hotel on the Gold Coast which has always been an excellent and professional conference venue impressing delegates, presenters and sponsors. It’s fair to say it’s our favourite venue. Our conference is a permanent fixture in the national calendar and provides a great opportunity for attendees to update their credit knowledge and learn the latest in credit advancements and new legislation. It is also a great opportunity to catch up and network with fellow credit professionals. We thank our Premium Sponsor Equifax who have supported the conference as Premium Sponsor for over a decade and through their partnership continue their investment in value and continue to invest in. A highlight of the conference is the President’s Gala Dinner including the announcement of the Young Credit Professional of the Year Award, generously sponsored by illion. Thank you to all delegates who attended the conference and the exhibitors who supported us with their exhibition booths that help keep us up to date with the latest products and services. On Wednesday morning prior to the Conference opening we held a leadership forum which provided insights as to how to achieve the best from your team by positive and influential leadership. The conference commenced following the CCE lunch with our keynote speaker, James Pearson, CEO of the Australian Chamber of Commerce and Industry followed by presentations on economic and global updates. Day two and three included a wide range of subjects on credit, fraud and technological developments. These days also included concurrent sessions offering a significant scope of subjects for delegates to choose from. In the coming pages we cover the numerous award presentations covered in the three days including the announcements of the winner of the Young Credit

Professional award sponsored by illion and the Credit Team of Year sponsored by Equifax. Presentation of certificates to our new Certified Credit Executives including the Dux award donated by National Credit insurance (Brokers) and an acknowledgment of CCE’s who have recertified. Further we cover the announcement of the winner of the Student of the Year Award and the President’s Trophy for the best performing Division. A conference as large and successful as ours would not be possible without the support of our sponsors and exhibitors, all of whom are actively engaged in our industry providing services and products to assist credit professionals perform their roles. Thank you to everyone who attended and we hope you enjoy the following pages that celebrate all things AICM!

AICM High Achievers AICM is proud of the education it undertakes and this support of fellow credit professionals was a central tenant in forming the organisation. Each year we present awards for the three qualifications plus an overall Student of the Year and we use the following selection criteria: To be eligible students must have: 1. graduated a full qualification within the past 12 months 2. participated in all online forums for their chosen units of competencies 3. completed all Trainer Marked Activities for their chosen unit of competencies 4. completed their qualification in the required timeframe, or a shorter timeframe 5. submitted each of their assessments in the required submission timelines.

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

2019 National Conference

What a fantastic 2019 conference!

2019 National Conference

Conference introduction Recommendations will be based on: z Assessment submissions demonstrated outstanding quality and detail to the units of competency being assessed z Overall engagement with facilitators and assessors z Commitment to the learning process z Quality of work z Skills and knowledge growth and understanding over the duration of the qualification

Certificate III Mercantile Agents

Rebecca Thompson.

Rebecca Thompson of St Peters College. During her studies Rebecca’s submitted work constantly demonstrated a high level of understanding, asking for clarification when required so that maximum knowledge for each unit was evident. All the criteria of the course have been met with Rebecca’s online program, which displayed dedication to her professional development and to her employer. We wish Rebecca well with her studies and her career.

FNS40115 Certificate IV in Credit Management

Adrienne Mills.

Adrienne Mills of Warrnambool Cheese & Butter Factory (Vic) (Runner up 2018/2019 Student of the Year) Adrienne was an online student and throughout the duration of the qualification, her assessments displayed good knowledge of each unit and the understanding of how this knowledge merges into the workplace environment. The clarity of her explanations and the research performed acknowledge her commitment to the credit industry. Adrienne has met all of the selection criteria and demonstrated throughout the course a commitment to the pursuit of knowledge and to her professional development. We have no doubt that Adrienne is an asset to her employer.

FNS51515 Diploma of Credit Management

Judith Riley with AICM CEO Nick Pilavidis.

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Judith Riley of Iplex Pipelines Australia P/L (Qld) (Winner 2018/2019 Student of the Year) Judith completed her studies within 18 months which demonstrated a great commitment to her professional development. Each assessment displayed good research and knowledge relevant to the particular unit and how it was instrumental in the workplace. Based on her commitment, we have no doubt that Judith will be instrumental in driving the future of her organisation.

CCE Lunch

This year our speaker was James Pearson, CEO Australian Chamber of Commerce who updated the attendees with current economic trends and expectations for 2020 that our group could take back to their

2019 CCE Dux Leanne Farugia (Ashdown-Ingram) receives her prize of a bottle of Grange from NCI’s Zara Mends and is supported by CCE Director Lou Caldararo.

employers and help to drive their businesses.

James Pearson was a very entertaining, knowledgeable and engaging presenter.

Brian Kaye (Godfrey Hirst), Nick Pilavidis (AICM), Fabian Sommariva (Allegis Group), Leila Sellwood (Allied Healthcare), Joe Losino (Ruralco), Katrina Bromley (Spicers), Rick Dunham (EB Mawsom), Leanne Farugia (Ashdown-Ingram), James Devonish (Oakbridge Lawyers), Grant Morris (Southern Steel), Merv Mahony (GNS Wholesale Stationers), Eric Milne (Master Builders Association of NSW), Toni Sawyer (AICM), James Neate (Lynch Myer) and Dave Hunt (FujiFilm).

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

2019 National Conference

s part of the benefit and recognising the importance of our Certified Credit Executives, each conference we hold a premium lunch with speaker.

2019 National Conference

Conference Dinner

highlight of the conference is our President’s Dinner which this year had an amazing theme of “Fire and Ice”. Attendees were wowed with the amazing acrobatics and fire twirlers plus the music from the band had everyone up dancing from the first song!

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Conference Dinner

2019 National Conference

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December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

2019 National Conference

Conference Dinner

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Conference Dinner

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2019 National Conference

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

2019 National Conference

Exhibitors

ur exhibition was one of our largest and the number and breadth of organisations that represent our industry and without which we wouldn’t be able to complete our duties – thank you to the exhibitors we really appreciate you support !

Equifax

AFSA

AMPAC

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CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Exhibitors

2019 National Conference

illion

Jirsch Sutherland

Bureau Van Dijk

Cloud Payment Group

Collection House

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

2019 National Conference

Exhibitors

Cosyn/Onguard

CreditorWatch

DebtCol Software

Detective Desk

Esker

Finstro

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Exhibitors

Noble Systems

Results Legal

Sharp & Carter

Turks Legal

Zipform

2019 National Conference

Neopost – soon to be Quadient

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December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

2019 National Conference

Credit Team of the Year

e congratulate 2019 Credit Team of the Year – AGL! Our finalists were Woolworths and AGL and in a very tight race the winners were the extremely capable team at AGL.

AGL represented by Ivan Lim, Gurpreet Pradhan, Sara Li, Nerita Somers, Alison Said and Dimitri Georgacopoulos.

Fantastic representation of this amazing award and the investment made by the team’s employer and our award sponsor Equifax.

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Credit Team of the Year

2019 National Conference

Debbie Leo announces the winning team.

Our 2019 runners up representing Woolworths were Rob Fellows, Teena Ryan and Neil Padley.

Teena Ryan accepts runner up on behalf of Woolworths.

Nerita Somers, Alison Said and Dimitri Georgacopoulos of AGL.

Alison Said accepts the winner on behalf of AGL.

Australian President Trevor Goodwin congratulates AGL on their win.

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December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

2019 National Conference

Young Credit Professional

e were thrilled to present our 2019 Young Credit Professional Ashleigh Mason with her well deserved award at the President’s dinner.

National President Trevor Goodwin presents 2019 Young Credit Professional Ashleigh Mason with Craig Brooks of award sponsor illion.

Ashleigh addresses the President’s dinner

Proud YCP coaches Decia Guttormen and Toni Sawyer congratulate Ashleigh

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CREDIT MANAGEMENT IN AUSTRALIA • December 2019

YCP

Ceyda Sert accepts her trophy from National President Trevor Goodwin.

Charis Ludermann addresses the dinner.

Clare Venema accepts her trophy from illion’s Craig Brooks.

Fahan Hossain responds to a question.

Ashleigh Mason receives her trophy from Craig Brooks of illion.

Ashleigh celebrates with her partner and parents who joined her for the dinner.

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

2019 National Conference

Finalists: Clare Venema (SA), Ashleigh Mason (Qld), Farhan Hossain (Vic/Tas), Ceyda Sert (NSW) and Charis Ludermann (WA).

2019 National Conference

Faces in the crowd

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Faces in the crowd

2019 National Conference

2019 National Conference Faces in the crowd

Faces in the crowd

2019 National Conference

DIVISION REPORT

New South Wales

Theresa Brown, David Lee, Trent Harwood, Cameron Chee, Shamik Paul (all Optus) and Ceyda Sert (Atradius).

Trivia night runners up – Sev Indrele and Grant Morris (both Southern Steel) Diana Chin (Westpac) and Ceyda Sert (Atradius).

President’s Report

February 2020 which provides a complete summary of all the recent and proposed changes to the laws relating to Credit, Debt Collection and Insolvency. As well as practical solutions to the problems that are faced by Credit Managers. Ensuring that the emphasis on membership engagement remains a priority with regular Toolboxes which will educate and focus on niche areas of credit. Wishing you a very happy and safe Christmas and New Year from all of us here in NSW.

As 2019 is coming to an end, I would like to extend a huge thank you to the NSW Council who work tirelessly in membership engagement, education and promoting the values of the AICM. As at the time of writing we unfortunately have said goodbye to our Vice President Andrew Smith. Andrew resigned from council, and from his position as Vice President and his absence will be noticed by us all. Andrew is still very committed to the AICM, so we will continue to see him around. Andrew did a fantastic job of relieving my position as President whilst I was on maternity leave, so I will always be very grateful to him. The 2019 National Conference, which was held at the Gold Coast in October, was a huge success. The quality of the speakers and the relevance of the topics resulted in notable membership engagement. Well done to all those involved in the organisation of yet another outstanding National Conference. The Pinnacle Awards for NSW is scheduled for late November 2019. The Pinnacles Awards, is an important night as it is about recognising and rewarding outstanding credit professionals. The nominations and voting is in the hands of the AICM members, so it is a great opportunity to celebrate the high calibre of award nominees and your colleagues. In addition, the Pinnacle Awards provides the AICM members, and guests, with the opportunity to celebrate the year, and wish each other well for 2019. We do have a lot to look forward to as we settle back into work in 2020. Some highlights include: The National Insolvency Seminar will be held in 68

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

– Balveen Saini MICM CCE NSW Division President

Trivia Night The Trivia was held at the Holiday Inn Old Sydney with beautiful sunset views of Sydney with 90 people in attendance. The NSW AICM Trivia Night again proves to be one of our most popular events. Competition was strong with a great turnout including faces both old and new. The weather caused a last-minute room change as the rooftop proved to be too wet and rainy to use. While the venue was stunning, the room being divided by the buffet meant quite a challenge for our fantastic trivia host Rita. Despite the unusual layout Rita again proved to be a crowd favourite with her witty humour and professionalism. Congratulations to the winners Masen Black Lawyers. It was a great night testing your knowledge and network in a fun and engaging way. There were canapés, drinks and a chance to win some great prizes – Theresa Brown MICM CCE

New South Wales

Trivia night winners Mason Black Lawyers represented by Paulina Kozub, Jenny Valentic, Chloe Boyse, Tara Wilson, Cameron O’Connor, Ethan Graham, Samantha Kazzi, Natalie Gewerc, Danielle Fernandez and Vittoria Rampoldi.

NSW Councillor Dave Hunt did an outstanding job being MC of the breakfast.

Economic Breakfast presenter – Mark Thirlwell of AICD.

Economic Breakfast With the recent national and global uncertainty and plunging economic indicators, it is visible that credit risks are escalating across the economy with significant setbacks With media speculating the US, New Zealand and even Australia are headed towards a recession and the ongoing trade wars starting to bite, it’s never been more important to be on top of current economic conditions.

Fantastic turnout to our first breakfast and thank you to event hosts TurksLegal.

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

Trivia night celebrations – John Fairgray (BBW Lawyers), Peter Morgan (NSW Director), Luis Ormazabal, Nicholas O’Connor and Andi Warda (all BBW Lawyers) with Odette Lafourcade (Byron Thomas).

DIVISION REPORT

New South Wales As a credit professional, understanding recent and emerging trends and the shifting political landscape has never been more vital to how you manage credit exposures. To help navigate these challenging times Mark Thirlwell, Chief Economist at the Australian Institute of Company Directors put on an Economic Breakfast update discussing what the evolving trends mean for credit management. Mark Thirlwell joined the Australian Institute of Company Directors (AICD) as Chief Economist in February 2019. Previously, Mark was Head of Research at the Australian Trade and Investment Commission (Austrade), where he supervised a team delivering research and analysis of Australia’s international trade and investment profile, including Tourism Research Australia. Prior to this position, Mark was Austrade’s Chief Economist for four years and spent ten years as the inaugural Director of the Lowy Institute’s International Economy Program. The Economic Breakfast was a fantastic turnout. Turks Legal put on a prodigious spread overlooking the Sydney Harbour. It was great to see seniors within the field of credit attend. I feel this event was excellent and very well put together, a well presented update on the economic situation both domestically and internationally and would be good to do it again in the new year and hope to see more people attend.

consign/guarantee on a loan or a credit card application. Kindly, but firmly, say “Noooooooooo!” Co-signing or guaranteeing any credit product makes you responsible for the repayment of that debt. If you guarantee something for a child or a relative, you need to stay connected to that debt to make sure it’s being repaid. If it isn’t, your credit could be compromised, and you could find yourself on the hook for money you didn’t spend.

Credit Quote of the Month “A bank is a place that will lend you money if you can prove that you don’t need it” – Bob Hope

The Australian Institute of Credit Management welcomes our Partners for 2019. National Partners

Trusted Insights. Responsible Decisions.

Divisional Partners

Meet a Councillor Peter Morgan is currently Director of Byron Thomas Recruitment since March 2009. Peter started his journey in Credit with Kone PLC in the UK and then IBM. After moving from England to the “lucky country”, Australia in 2004, he changed career paths and started in recruitment at Michael Page International where he was recognised as one of the top billers in the country. Peter loves to add value back to the industry that he is passionate about and that helped him build his career. Peter first attended an AICM event in 2008, then became a member in 2011, a councillor in 2013 and received his CCE in 2015. He became Director of New South Wales state council in December 2018. Peter is passionate and loves spending time with his dog ‘Yoda’, his fiancée Odette, travelling, Tottenham Hotspur, red wine and long weekend getaways.

What really gets my goat? Going guarantor on a loan you don’t control

Someone with less than ideal credit (or no credit at all) may someday ask you to 70

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

CREDIT MANAGEMENT SOFTWARE

Official Division Supporting Sponsors

Our National, Divisional and Professional Partners support and work with the AICM to promote the Institute’s activities, represent the Credit Industry and develop the careers of all Credit Professionals. As these organisations support your Institute and your Industry please consider them when you require assistance.

Queensland DIVISION REPORT

Sonny Nair (Mitsubishi), Jean-Marc Nemorin (Credit Clear) and Justin Watson (Credit Solutions).

Shane Ashton (ARMA), David Jacometti (Vincents) and James Cochrane (Stace Hammond).

Nunzio Settinelli (MM Electrical) with his wife Noula Settinelli.

Katherine Kershaw and Ashleigh Mason (National Collections) with Bart van Riel (Dulux).

President’s Report

A huge shoutout and thank you to all the QLD councillors, without your continued dedication to the AICM and the broader credit community we wouldn’t have the amazing events we have come to know and love. Thank you to our National and Divisional partners, we love having you as part of the team and look forward to big things next year. I want to wish every member and their families a very merry Christmas and I hope you all have a wonderful New Year and we cannot wait to see you all again in 2020.

What a year 2019 has been! This year the National conference was held on the sunny Gold Coast and with record numbers in attendance it was a fantastic week and we are looking forward to next year in Sydney. A huge congratulations to our very own Ashleigh Mason for taking home the National YCP trophy, we know she will do great things and look forward to working with her on all our events next year. We also had Judith Riley of Iplex Pipelines take home student of the year and Leanne Farrugia from Ashdown Ingram walk away with CCE Dux, congratulations ladies, I admire your work ethic and perseverance to achieve these results. This year I was honoured to be re-elected as Division President and we saw the addition of Fiona Doherty to council. There’s so much to do and we’re excited to work for the industry The QLD council are already working hard on next year’s events, finalising the 2020 calendar with the first event being a CCE/Economic update breakfast and lawn bowls event in February, followed by our first half day seminar in March.

– Roger Masamvu MICM CCE Qld Division President

National Conference – Holey Moley Golf Night We swapped the 9 irons for putting clubs this conference and had our inner child at the ready. A fabulous turnout of conference delegates who let their hair down on night one! This concept has taken Australia by storm and brings a distinctive style of fun in the form of a multisensory labyrinth mini golf course, combined with a fully stocked bar and delicious pizzas.

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

Queensland

Matt Jackson watches colleague Michelle Carruthers receive her NAGA award (both CreditorWatch).

Miriana Lowrie (1Centre), Elisha Dosser (Dynamic Supplies), Stacey Woodward (Provet) and Sarah Ramsey-Caudle (Turks Legal).

Pro Shop.

Marguerite Freney (ALH Liquor), Toni Sawyer (AICM) and Karen McMahon (Good Price Pharmacy).

We had people take away some great prizes, even last place, and let’s be honest were they even trying or did they just want the $2 gag gift!? We even had the pleasure of celebrating the wedding anniversary of Nunzio & Noula Settinelli, so romantic, congratulations guys! Extra special thanks to all of our sponsors for making the night possible (Turks Legal, Vincents and Thynne Macartney) and to our wonderful council members for hosting the evening.

Half day seminar – Effective Collection Strategies

Workshop - Face to face Our last face to face training for the calendar year saw Toni Sawyer deliver ‘Manage and Recover Bad and Doubtful Debts’. A topic that as Credit Managers we are all too familiar with. A very productive day had by our attendees as they built on their skills to help identify, understand, negotiate and most importantly recover the money for their organisations. Keep your eyes peeled for the 2020 Calendar for all Face to Face Units and Credit Tool Boxes for the New Year – available soon on the AICM website. 72

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

On Friday 6th September we had the pleasure of Hosting the AICM QLD Half Day Symposium at Vincents Office in Brisbane. This Half Day Symposium was based on Personal Development. Our first speaker was Sally Foley Lewis. Sally is a professional speaker, certified, master facilitator, executive coach and author. Sally is a multiple award winner, one of LinkedIn’s 25 Top Voices for Australia for her thought leadership, and is a truly global speaker. Sally came to us with a fun and fresh presentation about approaching your boss, management team or CEO with an idea you want to pitch, how to structure that pitch and how to get that YES/Approval. Sally provided extensive technical, she engaged with the audience, gave out gifts and made us all laugh. Our Second speaker was Tina Winchester. Tina is the Mental Health Director and Co-Founder of the Career Development Centre and Mentally Well Workplaces. Originally from the UK Tina has 25 years’ experience working in mental health services, training and awareness

Queensland

State President Roger Masamvu addresses attendees.

people first, empowering them and constantly reminding ourselves that all of these new technologies are first and foremost tools made by people for people.” On behalf of the AICM we would like to thank all speakers and attendees for a fantastic event. As well as the QLD Council members who gave up their time to put the event together.

The Australian Institute of Credit Management welcomes our Partners for 2019. National Partners Thank you Vincents for providing our room.

Trusted Insights. Responsible Decisions.

and private practice. Tina is the Head of Employee Assistance Programs at the Career Development Centre in Brisbane, providing bespoke workplace counselling services to employees of multiple organisations. Tina talked us through the very important topic of mental health within the workplace and how we can all help support individuals struggling with both their personal and work lives. Our Third and Final Speaker was Phil Ringuet from Vincents Chartered Accountants. Phil is the Director at Vincents, Specialising in Lending Solutions and prides himself on connecting professionals and business in a seamless manner to provide answers which ultimately help his clients achieve their best financial future. Phil has extensive experience in the banking sector which has allowed him to gain a deep knowledge and understanding of relationship management and leading teams along with debt structuring and sales. Phil’s presentation focused on credit technology developments and what organisations are doing to harness the skills of their team with the use of technology. Phil also introduced us to “The Fourth Industrial Revolution”, by Klaus Schwab. Schwab calls for leaders and citizens to “together shape a future that works for all by putting

Divisional Partners

Official Division Supporting Sponsors

Our National and Divisional Partners support and work with the AICM to promote the Institute’s activities, represent the Credit Industry and develop the careers of all Credit Professionals. As these organisations support your Institute and your Industry please consider them when you require assistance.

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

Speakers: Tina Winchester, Phil Ringuet and Sally Foley Lewis.

DIVISION REPORT

Victoria/Tasmania

True Colour attendees – Backrow: Natalie Sherriff (NHP), Stephen Langhammer (Robert Half), Kim Booth (Coach Kim – Speaker), Bonnie Bester (Maurice Blackburn Cashman), Ryan Banks (Robert Half), Catrina Galanti (NCI) Debbie Bricknell (Regis Group), Michelle Adams (Robert Half), Carolyn Addley (Toll). Seated: Lorraine McKenna, Helen Veldhuizen and Vicki Wilkinson (all Simonds Homes).

President’s Report

True Colours

I was surprised and humbled to win the Presidents trophy for VIC/TAS 2019 at the National Conference dinner sponsored by illion. Winning such a prestigious trophy and have my councillors accept the trophy with me made me prouder of who we stand for as the VIC/TAS Council. Over the last couple of years my councillors and I have engaged with our members to align our strategy to ensure that we provide the best membership experience for Vic/Tas. Without our member support, the Presidents Trophy wouldn’t have been possible; big thank you to each one of you who made this possible. In our last magazine the Credit Team of the year sponsored by Equifax was announced and I was excited to see two representatives from VIC/TAS who became the finalists. Congratulations to the AGL team winning and the Woolworths team for being the runners up. Both of your organisations demonstrated that a credit team needs to be well aligned and positioned, and only when they understand their customers’ needs, can they make a better decision to support their customers. With 5 weeks to go before Christmas we have almost finalised our event & professional development calendar for 2020 and are looking forward to sharing this with you soon. If you are as organised as me, you would have already made a big dint in your Christmas shopping. One handy tip to beat the Christmas rush, wrap your Christmas gifts when you have purchased them and free up December to enjoy your Christmas events. Big thank you to all our sponsors and members for making 2019 a successful year and I look forward to working and seeing you all in 2020.

What a way to end the week! Over 40 members enjoyed an extra shot of motivation with their coffee and breakfast at our Show Your True Colours event. On a bright Friday morning on 20 September, at the Quest NewQuay, we were hosted by our President, Sherif Hussein and Vice President, Catrina Galanti, with team colours proudly on display. Our key speaker, Kim Booth, also known as Coach Kim, took the lead and injected us with some energy and insights to kick our own goals in the lead up to Grand Final weekend. Coach Kim is a performance coach who specialises in career coaching and mentoring. His expertise as a strategic business leader for over 15 years, has given him the opportunity to support people making ambitious leaps in their career, while maintaining a strong sense of self outside of the workplace. With his signature high energy, Kim took us on a quick, but impactful, coaching session to make sure we got the most out of our day – and the days that follow! With key insights surrounding mindset, the impact of journaling and setting SMART goals, our interactive session highlighted the importance of transparency leading to accountability and more. Followed by networking, we all walked away with goals, plans and a couple of business cards to get the journey started. We are grateful to our AICM committee for putting together this event and our divisional partners, TurksLegal, Onguard, Sharp & Carter and AMPAC for making this event possible.

– Sherif Hussein MICM CCE VIC/TAS State President

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

– Katheryn Kershaw MICM

Victoria/Tasmania

Thanks to Vic/Tas Councillor Robyn Erskine for chairing our exciting Credit Panel Update.

Credit Panel Update

Insolvency & Law Reform update

On Friday 8 November, members and guests gathered at the Quest NewQuay in Docklands to hear the last credit panel update for the year. Hosted by valued councillor and liquidation specialist Robyn Erskine, members were able to soak up a last bit of knowledge before the slide into the silly season. Stuart Musgrave, Principal Advisory Services Consultant at Equifax gave the members an in depth look at the latest on Comprehensive Credit Reporting. A reciprocity system, there are now 46 lenders on board sharing their data. With 15 million credit cards currently in circulation in Australia and 78% of the big 4 banks’ data now being actively shared, there has been an increase in overall scoring for individuals across the board. With industry disruptors from the “buy now, pay later” space being the highest adopters in the marketplace, this will continue to change the face of traditional lending in Australia. Dylan Smith, entrepreneur extraordinaire and founder of Rubix, dove into his plans to turn Melbourne into the Silicon Valley of Australia. With technology solutions for blockchain (“web 3.0” for those in the know) his major goal is to bring trust back to transactions between peers and give the power of purchasing and credit data back to the people. Dylan predicts a volatile transitioning period as corporately owned data shifts back to the consumer and cannot wait for the true disruption to commence. Frank Gambera, an AICM councillor with over 36 years litigation experience in commercial law including insolvency law and credit law, updated us on the latest high court decision in the Amerind case on trust assets. The reality is that you must prove you are a trust creditor in order to exercise the right of power of exoneration. The right of exoneration is where the trustee has incurred the liability, the liability remains unpaid and the trustee takes assets out of the trust to satisfy the debt pursuant to its indemnity.

– WATCH THIS SPACE!

– Catrina Galanti MICM CCE, Vic/Tas Vice President

Insolvency Inquiry Announced In October 2019 The Australian Small Business and Family Enterprise Ombudsman announced an inquiry into the Insolvency sector focusing on small & family businesses. The Inquiry is to examine: z the existing insolvency system through the experience of small business z the degree of transparency of the governance, processes and costs of practitioners including legal advisers, valuers, investigating accountants, administrators, receivers and liquidators z how the insolvency of a small or family business may lead to bankruptcy for the owners z how the framework impacts the practices and fees of insolvency practitioners. It will also focus on whether the current insolvency system encourages practitioners, in the first instance, to restructure small or family businesses to turn them around or if a restructure is not possible, the inquiry will investigate if the current insolvency practices achieve the best outcome for all parties. The scope of the Inquiry, while well intentioned, has been questioned by many. Insolvency Practitioners well know that while restructuring a small business sounds admirable, and even though it is an option available to a small business owner under the existing laws, it is sadly not something that is often undertaken mainly due to the business owner leaving things too late or simply having nothing left to restructure. Reviewing the adequacy of our existing insolvency laws and looking for ways to improve those laws is always a welcome opportunity. However even ARITA – Australia’s professional body for insolvency and turnaround practitioners in a recent press release, has expressed

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

Our presenters: Frank Gambera (McMahon Fearnley Lawyers), Stuart Musgrave (Equifax) and Dylan Smith (Rubix).

DIVISION REPORT

Victoria/Tasmania

A proud Council accepts the 2019 President’s Trophy represented by Katheryn Kershaw, Frank Gambera, Sherif Hussein, Lou Caldararo, Catrina Galanti, Sunny Sharma, Mary Petreski and Michelle Carruthers.

some disappointment at what it sees as yet another inquiry into insolvency that fails to address the need for a whole of system reform and expressed concern that the inquiry had a very narrow focus ARITA earlier this year had announced an 8-Point Plan which suggested ways that policymakers and regulators could enhance Australia’s business rescue culture, better help indebted individuals back onto their feet, and ensure that creditors – from small businesses to the taxpayer – get a fairer deal from insolvency.’ An interim report will be released by The Australian Small Business and Family Enterprise Ombudsman in December with a final report to be handed down in February 2020. Details of ARITA’s 8 Point Plan can be found at https://www.arita.com.au/ARITA/News/ARITA_News/ Financial_Recovery_2020_ARITA_s_8-point_plan_to_ strengthen_the_insolvency_regime.aspx – Robyn Erskine MICM

President’s Award On Thursday 17th October 2019 at the fabulous Marriott Resort on the Gold Coast, AICM presented the President’s Award, 2019 to Vic/Tas! Congratulations to the Vic/ Tas councillors: Lou Caldararo, Sherif Hussein, Michelle Carruthers, Catrina Galanti, Alison Malek, Frank Gambera, Sunny Sharma, Amaran Navaratnam, Katheryn Kershaw, Robyn Erskine, Rex Cheng and Farhan Hossain. A special thanks to Sherif, our Division President for your support and mentoring. Also thank you to Lou, Division Director for all your mentoring. Vic/Tas councillors volunteer and work endlessly to guide and assist credit professionals in their personal development, CCE guidance, membership, networking events, workshops and much more. An amazing effort 76

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

by all. It has been 13 years since the president’s award was awarded to Victoria, and we will do our best to take home the award in 2020! Please take a minute to congratulate the Vic/ Tas councillors on an amazing achievement. Thank you – Mary Petreski MICM CCE

The Australian Institute of Credit Management welcomes our Partners for 2019. National Partners

Trusted Insights. Responsible Decisions.

Divisional Partners

CREDIT MANAGEMENT SOFTWARE

Official Division Supporting Sponsors

Western Australia/Northern Territory

President’s report As the weather starts to warm and the days get longer, the changing seasons have also seen a change to the WA Division Council. In early October just prior the National Conference I was humbled and privileged to be elected as the new Divisional President for Western Australia. It is an honour to be entrusted with such responsibility by my fellow councillors and I thank them for their trust and support. I cannot go further in my first report as President without acknowledging the absolutely stellar contribution to the AICM, and the Western Australian Credit Community made by our outgoing President, Lisa Marr. I have been, and remain inspired by her tireless dedication and commitment to the AICM, and her passion for supporting the credit community, particularly with her work on the WinC initiative. I can only hope that I will be able to continue to build on the invaluable foundation that she has built in the last three years, and I am strongly committed to ensuring that this legacy will continue long into the future. Lisa has now chosen to step down from council however I am sure that she will continue her involvement in the WA Credit Community. It has been an eventful period for the WA Division, with a small contingent of WA members making the long trek to the Gold Coast for the National Conference and to support our YCP State Finalist, Charis Ludemann from the Bunnings Group, who flew the division flag high and represented the state and most notably herself, exceptionally with great maturity and professionalism. Sadly, it was not to be Charis’ time on the national stage however her experience in the YCP arena will equip her well for the future (and perhaps another shot for the 2020 YCP Award?). Congratulations to the eventual National winner,

Ashleigh Mason and to all the state finalists, a very impressive group of young people. October also saw us again return to Ischia Ristorante in Highgate for our very successful networking event, hosted by Hentley Farm Winery. A strong case of Deja Vu prevailed earlier in the day when the merchandise (ie: the wines) struggled to find their way to the venue – however thankfully made it in time. A breezy evening with the weather rolling in did not impact the turn out, with over 30 members and guests sampling both the wines and the fantastic food put on by Ischia. Many thanks to Kevin Allen for making the arrangements and to Angus from Hentley Farm, who was quite engaging in his tasting notes and insights. Word has it that there may have been a little bit of wine ordered following the evening, great to see our members investing in an industry that most of us value so dearly. Hard to believe that Christmas is really only just around the corner again. Our final event of the year, the Xmas Sundowner is rapidly approaching also, and will be held at Bayside Kitchen (Matilda Bay) on Thursday 5th December, sponsored by WA Insolvency Solutions (a division of Jirsch Sutherland) and Alloc8. One of our signature events, it is expected to be another great evening of networking in a wonderful venue with fantastic views of the Swan River and our city. We had originally planned for this event to also host the Pinnacle Awards however we have made the difficult decision to postpone these awards until next year due to a very limited number of nominations being received. I am sure that next year will see a greater interest in these awards, as they are the perfect opportunity to acknowledge our fellow credit professionals and celebrate our achievements together. In closing, I actively encourage all Western Australian members to embrace the opportunities, initiatives

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

Enthralled wine night attendees listen to our presenter Angus Heida discuss the wine pairing with food.

DIVISION REPORT

Western Australia/Northern Territory WA/NT Division Wine night

AICM Director Debbie Leo with Stuart Musgrave (Equifax), Life Member Kevin Allen with Steve Mitchinson (Dept of Finance) and Raff Di Renzo (Nova Legal).

and events that the AICM has to offer. This is your professional industry association and its ability to continue to support, engage and empower credit professionals is dependent on you. Initiatives such as the Women In Credit (WinC) luncheons, Young Credit Professional (YCP) Award, Certified Credit Executive (CCE) program, Credit Toolboxes and National Seminars are all in place to celebrate, recognise, reward and educate you, our members. If there is anything that I, or my fellow council members can do to assist with seeking the support of your employer or other stakeholders to be able to become involved in any of these or other initiatives, then please let us know. On behalf of the WA Council, I wish you and yours a very safe, relaxing and happy holiday season. Be sure to shut down the computers and phones for a little while and enjoy! – Troy Mulder MICM CCE WA Division President

On 23 October the AICM in WA again held a wine tasting/ networking evening, returning to Ischia Ristorante in Highgate. We were lucky enough to have wines presented by famed Barossa Valley winery Hentley Farm. Our presenter for the night was Angus Heida. Angus is an entertaining host who regaled the crowd with stories behind each wine, keeping the crowd’s attention throughout. For those of you who’ve not yet experienced Hentley Farm wines, amongst other things they’re famous for the naming selection of two of its juxtaposed Shiraz varieties: Beauty and Beast. The Beauty is known for its display of complex lifted aromatics, along with the softness and subtlety befitting a wine of this name. The Beast is known to exhibit great concentration of flavour and richness, with soft grippy tannins Keen and able Kevin Allen, Stuart Musgrave, Richard Tuffin, and Monty Purich were roped in to helping with Angus’ presentation, giving enthusiastic performances of the not-so-subtle differences between these varieties. The food provided by Ischia also did not disappoint, starting with the antipasto followed by wood-fired pizzas. These all complemented the different wines on offer. A great time was had by all attendees and rumour has it that the winery took an impressive number of orders on the night. – Jeremy Coote MICM

The Australian Institute of Credit Management welcomes our Partners for 2019. National Partners

Trusted Insights. Responsible Decisions.

Young Credit Professional update I experienced my first AICM National Conference this year and was privileged to attend, being the YCP finalist for WA and NT. Being a finalist provided a great opportunity for me to practise skills I don’t often have the chance to utilise and to network with other credit professionals across many different industries. I was able to spend a few additional days meeting the AICM committee and other YCP finalist before the official conference began. The knowledge that was brought to each session during the conference was very informative and of the highest quality. The venue was beautiful and the food was delicious. I would highly recommend anyone who is interested in networking or furthering their knowledge in the credit industry to attend the National Conference. I know I will be going back. – Charis Ludemann 2019 WA/NT Division Young Credit Professional

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Divisional Partners

Official Division Supporting Sponsors

South Australia DIVISION REPORT

President’s Report What a year! We started 2019 with the Collect with Confidence, Understanding Credit Risk toolboxes, then hit the fun times with Adelaide Fringe networking. We engaged our members with the half-day Insolvency Roadshow and celebrated Women in Credit, followed closely by a networking night with Never Never Gin Distillery to introduce to our young Credit Professionals (YCP) candidates for 2019. Leading into an early morning breakfast and onto the YCP Awards evening, celebrating our SA Division YCP winner (Clare Venema) whilst also recognising and celebrating our YCP finalist and our members’ mile stones. Brining us to the National Conference where everything and everyone comes together to reflect, share and network with other likeminded colleagues in the industry. This like any other year the SA AICM Counsellors bring you relevant and up to date content while encouraging networking and relationship building with our diverse members. We are currently planning our calendar of events for 2020. We hope to bring you a number of useful training options, including Toolbox sessions and Insolvency and PPSR seminars. We will keep the networking opportunities coming and plan to bring back the popular AICM Quiz night. On behalf of the SA Division Counsellors, I would like to thank you, our sponsors, members, friends and guests and wish you a safe and prosperous Christmas and New Year.

James Devonish (Oakbridge Lawyers).

The Australian Institute of Credit Management welcomes our Partners for 2019. National Partners

Trusted Insights. Responsible Decisions.

– Nick Cooper SA Division President

Social Networking – SA Legal Breakfast update

Divisional Partners

Session 1: “PPSA – What a credit professional needs to know!” James Devonish, Director at Oakbridge Lawyers

z Tips & Traps; z Recent Developments;

Session 2: “What’s happening in the world of Credit?”

Official Division Supporting Sponsors

James Neate, Partner at Lynch Meyer Lawyers

z Interesting cases and best practices for debt collection; z Updates to the lodgment and removal of Caveats on PEXA; z Recent insolvency cases and how they can apply to your business; z Unfair contracts & terms and conditions;

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

South Australia

New Members The Institute welcomes the following credit professionals who were recently admitted to membership from September to November. New South Wales

Legal Breakfast.

On 3 October 2019, the SA Division Council held an informative and lively event at the Arkaba Hotel for members to get an update on the topical challenges that credit professional face, with respect to the PPSA and the best practices for debt collection. Members enjoyed a full breakfast and food for thought as industry leaders James Devonish from Oakbridge Lawyers and James Neate from Lynch Meyer discussed these matters, which invited dynamic conversation among members. Mr Devonish opened the seminar with his technical breakdown of the PPSA, particularly in reference to how the technicalities can slip up credit professionals when registering security interests. Mr Devonish then discussed recent case law that explored the current considerations of the Courts in determining the value of securities in unfair preference matters. Following this presentation, Mr Neate discussed the best practices for debt collection, noting that there is a delicate line that credit professionals must walk in the pursuit of debts and the utmost importance of maintaining the integrity of the profession. Mr Neate discussed relevant insolvency cases to provide members with practical examples of when they may come across situations that may cause uncertainty for businesses on how to proceed, and the Courts’ findings in relation to these situations. The presentations concluded with a morning tea, where members were able to discuss their personal experiences with the speakers’ topics, which provided for information sharing and comradery. We are looking forward to further informative sessions to help professionals stay on top of industry trends. 80

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

Priscilla Stephenson

DGI Debt Management Pty Ltd

Shalini Arora

Solgen Pty Ltd

Robin Austin

DGI Debt Management Pty Ltd

Baharak Bahrami

Ntt Australia PL

Laurence Barlow

DGI Debt Management Pty Ltd

Donna Biordi

DGI Debt Management Pty Ltd

Stacey Bowman

Gilbarco Australia Pty Ltd

Bradley Crawford

DGI Debt Management Pty Ltd

Nadine Crick

Essilor Australia Pty Ltd

Amanda Delasio

2XM Technology PTY LTD

Khanh Dinh

Rentokil Initial Pty Ltd

Hasan Dzonlagic

Flick Anticimex

Robert Faulkner

ActewAGL

Daniel George

DGI Debt Management Pty Ltd

Dominique Grubisa

DGI Debt Management Pty Ltd

Sharyn Hopping

Crane Australia Pty Ltd

James Hunt

Holcim

Aiga Iosefa

NTT Global Pty Ltd

Caroline Janji

Qantas

Grant Konrad

MinterEllison

Novka Krnetic

Southern Steel Group

Julie Lai

Rentokil Initial Pty Ltd

Matthew Lamb

Pro-Pac Group

Samira Lindaur

Americold

Stella Lino

Findex (Aust) Pty Ltd

Tracy Loureiro

Adelaide Brighton Pty Ltd

Bernard Mallet

Multipli PTY Ltd

Anthony Marino

Elantis Premium Funding

Julyan Merton

Crane Australia Pty Ltd

Susan Paku

Lynch Group Australia

Robert Pessotto

Crane Australia Pty Ltd

Anthony Roberts

Grow Asset Finance

Ljubica Violet Salvemini

Not applicable

Isha Shrestha

Americold

Helene Smeulders

Collection House Limited

Lily Soriano

DGI Debt Management Pty Ltd

Sarona Tikeri

Southern Steel Group

Mariea Tran

DGI Debt Management Pty Ltd

Diane Ussher

MinterEllison

Antonia Vucic

Minter Ellison

Jonathan Wightwick

Equifax

New Members Elaina Barlow

DGI Debt Management Pty Ltd

Oliver Bowers Davis

NTT Australia Pty Ltd

Kevin Donaldson

Nexxa Portfolio Management

Sharon Good

Network Steel & Aluminium

Joseph Gurn

Stoddart Group

Olivia Hadok-Quadrio

Nexxa Portfolio Management

Belinda Hill

Stoddart Group Pty Ltd

Brenda Oliver

Hastings Deering (Australia) Limited

Shannon O’Toole

Collection House Pty Ltd

Michelle Ramsamy

Hastings Deering Australia Limited

Jade Stafford

Hanson Construction Materials

DIVISION REPORT

Queensland

AICM Membership

AICM is focused on improving the credit industry by providing useful, practical information and guidance to members, which helps them to meet the high professional standards that the AICM sets and upholds. Members have access to a range of training and CPD events and resources that have been developed specifically for the credit industry, including the annual National Conference and a forum for networking with peers and sharing their expertise.

Individual Membership

Victoria Gavin Almeida

BMW Australia Finance Limited

Suzan Anagnostis

Aurora Energy

Judy Brain

Findex (Aust) Pty Ltd

Brendan Brown

Dulux Group Australia

Nigel Clements

Woolworths Group

Natalie Costante

BMW Finanical Services

Philip de Boers

BMW Financial Services

Rebecca Ford

CollectAu Pty Ltd

Shandell Hancock

Aurora Energy

Idil Kazanc-Aktas

Moula

Charles Kirk

Moula

Allison Lonergan

W Coogan & Co Pty Ltd

Matthew Luo

BMW Group

Donna Mills

Aurora Energy

AICM members are entitled to use the post-nominals MICM and, after one year of membership, able to work towards the Certified Credit Executive qualification through CPD activities and assessment. Members are also eligible to be elected to their relevant Division Councils.

Employer-sponsored membership For the full benefits of membership at discounted rates, employers can sign up any number of their staff. Additional benefits for the employer include: z Significant savings on costs of membership z Improvement of the credit management maturity of the company z Incentives for staff retention z Simplified access to expert knowledge through AICM resources z Improved education of employees through discounted attendance of AICM meetings, seminar and formal training

Ekaterina Morozova-Singh BMW Financial Services

Retired membership

Ananta Narayana Anita Pareek

Viva Energy Australia Pty Ltd

Anthony Petraitis

Wurth Australia Pty Ltd

Helen Quigley

Findex (Aust) Pty Ltd

Retired membership allows AICM members who are no longer working full time to keep in touch with industry developments and continue to have access to AICM resources, events and training.

Lewis Romano

Credit Clear Pty Ltd

Student membership

Teena Ryan

Woolworths

Ashley Saunders

Zipform Digital

Amrinder Singh

MinterEllison

Jason Sutherlin

CreditorWatch Pty Ltd

Student membership is available to full time students who are not employed. We encourage students who are interested in credit to become involved and understand the credit profession.

Mario Vladic

BMW Finance

Employer Sponsored (Group) Membership The program offers employers the opportunity to enrol multiple employees as members of the AICM at a discounted rate. The more members, the greater the discount from the standard cost of $415.00 for a new member.

Western Australia Richard Jose

Zipform Digital

Kevin McIntyre

Sadleirs Logistics

Tony Mott

Zipform Digital

Richard Vaughan

Zipform Digital

To find out more about AICM Membership go to www.aicm.com.au

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

AICM Marketplace Directory of services For information, options and pricing please contact Andrew Le Marchant on +61 2 8317 5052 or E: andrew@aicm.com.au ADVISORY AICM Divisional Partner

SV Partners Suite 7, Ground floor, 26 St Georges Terrace Perth WA 6000, GPO Box 2527, Perth WA 6001 Tel: 08 6277 0026 Fax: 07 3229 7285 Email: perth@svp.com.au SV Partners is a national specialist accounting and advisory firm, with offices in the metropolitan and regional areas of each state, across the eastern seaboard. Our expert accountants and advisors have the skills and experience to assist across a wide range of areas, including insolvency, turnaround and advisory services for accountants, financial institutions, corporations, financial and legal advisors, and their clients.

COLLECTIONS

COLLECTION SYSTEMS AICM Divisional Partner

Esker Australia Pty Ltd Suite 1502, Level 15, 227 Elizabeth Street, Sydney NSW 2000 Tel: 02 8596 5126 Email: info@esker.com.au Web: www.esker.com.au Cash is the heartbeat of your business, so give your AR department the tool they deserve! Esker’s AR solution help companies reduce costs for invoice delivery, accelerate their cash collection process and automate the reconciliation of payments. Contact us to easily achieve your cash collection goals, tackle root causes of payment delays and reduce collection disputes while improving customer relationships.

AICM Divisional Partner

DISTRIBUTION & PRINTING AICM Divisional Partner

Lane Communications Tel: 08 8179 9900 Web: www.laneprint.com.au Lane are widely regarded as one of the largest and most technologically advanced print production and distribution companies in Australia. We are an industry leader in digital and offset print, point of sale signs, complex embellishments and print finishing, storage, kitting and mailing. With innovation at our core, our services extend beyond transactional mail and promotional print production to include SMS, bulk email communications, and electronic billing solutions. Lane are your partner in print and multichannel communications.

INFORMATION

AICM Divisional Partner CREDIT MANAGEMENT SOFTWARE

OnGuard AMPAC Debt Recovery Level 5, 35 Clarence Street Sydney NSW 2000 Tel: 1300 426 722 Email: info@4ampac.com.au Web: www.4ampac.com.au Trust AMPAC, we guarantee to give you the right advice…… AMPAC provides a complete range of debt recovery and receivables management services to big business, government and thousands of SME’s nationally, so next time you are deciding how to deal with that difficult customer, pick up the phone and call us. We are ready to help you too.

Australian Recoveries and Mercantile Agents Tel: 1300 363 394 Email: info@armagroup.com.au Web: www.armagroup.com.au ARMA is a specialist provider of contingent debt recovery solutions, outsourced accounts receivables and litigation services. ARMA was started with the aim to have fewer customers and provide better service. We provide big agency expertise with a boutique service. The ARMA team has a wealth of experience in the debt collection industry across a diverse range of markets that was gathered from working at some of the largest collection agencies in Australia.

CreditorWatch

Tel: 1800 123 613 Web: www.onguard.com OnGuard’s Credit management solution will help you hit your collection targets – each and every month. By working smarter and providing better visibility, OnGuard will help you reduce your DSOs. Why not give your staff a friendly solution that will make their life so much easier. Contact us to show you how OnGuard has made life a whole lot easier for our customers.

CONSULTANCY AICM Divisional Partner

Kemps Credit Solutions 50 Grenfell Street Adelaide 5000 Tel: 08 8418 1450 Email: gcrowder@kemps.com.au Web: www.creditsolutions.net.au/kemps Kemps Credit Solutions. A debt collection partner you can trust. Working with some of the country’s leading providers of information management and data intelligence solutions. Since 1965 Kemps Credit Solutions has set the benchmark for providing quality collection and recovery services to South Australian businesses and government.

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

GPO Box 276 Sydney NSW 2001 Tel: 1300 501 312 Web: www.creditorwatch.com.au CreditorWatch is a leading commercial credit reporting bureau used by over 50,000 businesses across Australia. CreditorWatch offers a variety of products including customer monitoring/alerts, credit reporting, an indepth trade program and online credit applications to assist with customer onboarding and decisioning. Contact us today for more information or to organise a FREE TRIAL of any of products.

AICM Marketplace – our new initiative Welcome to our new marketplace. We’re proud of the AICM and we want to let all credit professionals know those businesses that support the AICM. Thank you to these companies for their continued support and please consider them first when you’re looking for assistance in your business. We’ll also include these sponsors on our website so you can be sure to find them easily. For more information contact:

Andrew Le Marchant Direct: +61 2 8317 5052 Email: andrew@aicm.com.au Tel: 1300 560 996

AICM MARKETPLACE

AICM Marketplace Directory of services For information, options and pricing please contact Andrew Le Marchant on +61 2 8317 5052 or E: andrew@aicm.com.au INFORMATION AICM National Partner

INSOLVENCY

LEGAL

AICM Divisional Partner

Trusted Insights. Responsible Decisions.

illion

Rodgers Reidy

Tel: 13 23 33 Web: www.illion.com.au

Level 3, West Wing, 50 Grenfell Street Adelaide SA 5000 Tel: 08 8470 9010 Web: www.rodgersreidy.com.au Contact: Rob Naudi

Nova Legal

The international insolvency network of Rodgers Reidy is uniquely resourced to specialise in turnaround and recovery strategies, corporate and personal insolvency. We aim to, wherever possible, rescue a company or individual in financial difficulty by designing arrangements that will return commercial viability, will benefit all stakeholders, and which avoid the need for liquidation or bankruptcy.

Nova Legal can assist with the recovery of problem debtors (large and small). Founding director Raffaele Di Renzo acts for creditors, debtors, directors, credit managers and insolvency practitioners in relation to solvency issues and dispute resolution.

Dun & Bradstreet has changed. We are now illion. Bringing data, analytics and insights to life is at the heart of what we do, and we will continue to break new ground in the product development and innovation space. Our commercial and consumer databases enable Australian businesses and consumers to make informed decisions, based on real time data drawn from an extensive range of sources. We remain a reliable and trusted partner to a wide range of global organisations, who use our solutions for credit reporting, risk management, sales and marketing and receivables management.

AICM National Partner

Equifax Tel: 13 83 32 Web: www.equifax.com.au Equifax is a global information solutions company, providing data and insights that help organisations and individuals make more informed decisions. As a leading provider of credit information and analysis in Australia and New Zealand, Equifax serves key markets in risk management, marketing services and HR solutions. Drawing from trusted sources to compile and process data, Equifax helps its customers see things and make connections that others can’t.

INSOLVENCY

Level 2, 50 Kings Park Road West Perth 6005 Tel: 08 9466 3177 Web: www.novalegal.com.au

AICM Divisional Partner

Results Legal Worrells Suite 1103, Level 11, 147 Pirie Street Adelaide SA 5000 Tel: 08 8214 0500 Email: adelaide@worrells.net.au Web: www.worrells.com.au Worrells is dedicated to solvency management, insolvency administration and forensic investigation. Worrells have been providing high quality corporate and personal insolvency services for over 40 years. We pride ourselves on offering reliable and practical solutions to those burdened with debt. With 24 partners and over 100 staff in 26 locations across Australia we are resourced nationally but focussed locally.

Level 4, 183 North Quay Brisbane QLD 4000 Tel: 1300 757 534 Web: www.resultslegal.com.au Results Legal is a national firm with a focus on promoting and protecting the rights of trade creditors. Our clients are some of Australia’s largest trade credit companies who rely on our assistance for legal recovery, dispute resolution, preference claim defence and PPSA rights. Results Legal are the obvious first choice for companies seeking a national solution to resolve commercial disputes and pursue swift, successful and cost effective legal recovery action.

AICM Divisional Partner

Vincents Level 34 Santos Place, 32 Turbot Street Brisbane QLD 4000 Tel: 1300 VINCENTS (07) 3228 4000 Web: www.vincents.com.au We live in a world of increasing complexities; the need for true expert advice is now more evident than ever. Established for more than 25 years Vincents is an Australian firm of accounting experts and business advisers specialising in assurance and risk advisory, business advisory, corporate advisory, financial advisory, forensic services, and insolvency and reconstruction. Gain insight and take control with Vincents.

TurksLegal Insolvency Intel Tel: 1300 265 753 Web: www.insolvencyintel.com.au Email: answers@insolvencyintel.com.au Insolvency Intel: a subscription-only provider of insolvency and turnaround services for credit managers. Backed by national firm Jirsch Sutherland, our friendly team is just a phone call or email away, providing members with practical, strategic advice about corporate and personal insolvency. Free initial consultation; networking opportunities; training and presentations; knowledge database access; regular newsletters. Register now for a free subscription.

AICM MARKETPLACE

Tel: 02 8257 5700 Web: www.turkslegal.com.au Contact: Daniel Turk TurksLegal is a specialist commercial law firm with 33 Partners and over 160 staff across our Sydney, Melbourne and Brisbane offices. We are proud to look after the interests of trade creditor suppliers and financial institutions in: l Portfolio debt recovery using our market-leading, real-time client interface, ‘TurksFocus’ l Resolution of complex debt disputes l PPSA recovery l Defence of unfair preference claims l Supply documentation and guarantees.

December 2019 • CREDIT MANAGEMENT IN AUSTRALIA

AICM Marketplace Directory of services For information, options and pricing please contact Andrew Le Marchant on +61 2 8317 5052 or E: andrew@aicm.com.au TECHNOLOGY

RECRUITMENT

TRADE CREDIT INSURANCE

AICM Divisional Partner

National Supporting Sponsor

Sharp & Carter

CreditSoft Solutions

Web: www.sharpandcarter.com.au

Tel: 1300 720 164 Email: info@creditsoft.com.au Web: www.creditsoft.com.au

For any assistance with Credit recruitment, please call Melbourne – Chris Belegrinos on 03 9616 2622 Email: cbelegrinos@sharpandcarter.com.au Sydney – Taha Sayed on 02 8315 8800 Email: tsayed@sharpandcarter.com.au Sharp & Carter will tailor candidate sourcing strategies to suit your company’s needs, taking into account factors such as time frame, budget, level of role and availability of candidates in the market. We are committed to achieving a successful outcome for every assignment on which we work.

CreditSoft specialises in providing credit managers with innovative products that will save your business significant operating costs and allow you to manage your time and resources more efficiently. We offer contact, tracing, payment, reporting and analytic solutions that redefine the way credit departments operate. Our goal is to ensure you achieve the best possible return on your investment.

National Credit Insurance Brokers Tel: 1800 882 820 (freecall) Email: info@nci.com.au Web: www.nci.com.au National Credit Insurance Brokers (NCI) has established itself as the premier trade credit insurance broker in Australia, New Zealand and Singapore. Trade credit insurance is a highly specialised area of insurance and, with its 30 years of experience, National Credit Insurance Brokers has developed an unmatched depth of expertise in arranging the right protection at the best price for your particular trading needs.

See you at AICM’s

2020 N A T I O N A L CONFERENCE

14-16 October 2020 Save the date!

go to www.aicm.com.au for more details 84

CREDIT MANAGEMENT IN AUSTRALIA • December 2019

AICM MARKETPLACE

The Publication for Credit and Financial Professionals

IN AUSTRALIA

Level 3, Suite 303 1-9 Chandos Street St Leonards NSW 2065 PO Box 64 St Leonards NSW 1590 Tel: 1300 560 996 Fax: (02) 9906 5686 www.aicm.com.au