The Australian Banking Association (ABA) is releasing new guidelines in order to control assigned debts that are purchased from Australian banks.
The recommendations include:
1. Banks being consulted before legal proceedings are initiated against a debtor; and
2. Banks are given a buy back option.
The ABA has also recommended to the Attorney General that the threshold for issuing a Bankruptcy Notice be increased from it’s current $5,000.
In our opinion, raising this threshold may allow exploitation of creditors by debtors, and should therefore be considered with due care.
We also contend that the recommendations are inconsistent with section 12 of the Conveyancing Act 1919 (NSW), which states amongst other things, that the assignment is to be ‘absolute’, which it cannot be if there is control by the banks and a buyback clause.
This will leave any assignment of debt ineffectual and unenforceable, leading to banks not being able to assign their debts.
More guidance and assistance needs to be given to assignees to reduce the small amount of misjudgements made when deciding to proceed with a Bankruptcy, and not an increase in the threshold amount.
Please call us on 02 9922 4111 to discuss any matters relating to these guidelines.