Credit Check of Fines and Super Priority - Factsheet

Transcription

1 Credit Check of Fines and Super Priority - Factsheet If you subscribe to credit check information, changes have been made by the Ministry of Justice which could give your business access to more information, and allow you to make better-informed decisions about a customer s potential credit risk. What are the changes? The key change is the development of a new fine enforcement initiative, Credit Check of Fines. This will allow subscribers of credit check information to get access to a customer s overdue fines or reparation information, allowing them to make betterinformed decisions about their credit risk. Alongside this, the Ministry and the court will also be implementing Super Priority. In certain circumstances, this initiative will give the court priority over secured property of a credit provider, if that property is seized and sold to pay overdue fines or reparation. Why are these changes being made? These changes are part of the Courts and Criminal Matters Bill which was passed by Parliament on 6 July 2011 and are aimed at strengthening the credibility of fines and reparation, motivating people to pay, and ensuring meaningful consequences are in place for those who fail to. Credit Reporting of Overdue Fines will encourage those with overdue fines and reparation to voluntarily pay and avoid putting their credit rating at risk. For people who use credit, or who value their credit rating, the risk of their overdue fines and reparation being reported will be a strong incentive to take action to pay. Credit Reporting of Overdue Fines will also make it easier for the court to contact people or organisations and collect overdue fines or reparation, because the court will be able to use the contact information provided by customers in their credit applications. What will these changes mean for your business? You will have access to more customer information which could potentially assist you to make better-informed decisions about a customer s credit risk, particularly if a customer does not have previous credit history. If you create a security on property when a customer has overdue fines and reparation you may risk not recovering all your security if that property is seized and sold by the court. Further information The Ministry is has worked closely with a number of stakeholders from the credit industry throughout the development of Credit Check of Fines and Super Priority.. Q+As on both initiatives are attached below for your information. If you need further information or would like to discuss these initiatives in more detail please contact:

2 Chris Parkin Analyst, Collections Service Design Ministry of Justice Ph If you have questions relating to the interface with your credit reporter please contact them directly.

3 Credit Check of Fines Q + As How will it work? Credit Check of Fines works by the Ministry of Justice releasing the total amount of overdue fines and reparation owed by a customer to organisations that have set up a facility with the Ministry to receive this information. How can I get access to this information? There are two ways you can get access to this information: 1. From a credit reporter - if you are a subscriber of credit reports, and your credit reporter has set up a facility with the Ministry to receive overdue fines and reparation information, they will supply this via an existing service or variation of that. If you use a webservice to access credit check information it is likely you will need to make some changes to receive this information. No changes will be required if you access credit check information via a website. 2. From the Ministry of Justice if you are eligible to be a subscriber of credit reports you will be able to access overdue fines and reparation information directly from the Ministry. But you will need to set up a webservice-based electronic interface with the Ministry. Information about this option is contained in the Credit Reporting of Overdue Fines Service Build Pack which can be supplied on request. In return for the overdue fines and reparation information, any updated or new contact information provided in the credit application will be received by the Ministry, and given to the court to contact the individual or organisation and take action to resolve the overdue amount. What information will be released? The total amount of overdue fines and reparation owing at the time the credit report is requested. The information that can be released will be restricted by law, and is not considered to be a credit default, so falls outside the normal rules of the Credit Reporting Privacy Code. What information do I need to include in the request? The normal information supplied as part of a credit check request. You will also be required to provide an assurance that your customer has consented to the release of their details to the Ministry for it to collect, retain, use and disclose that information to the Court. We encourage you to review your current consent to ensure it is adequate to meet this requirement. Will there be a fee to access this information? The Ministry will not charge a fee for the provision of this information.

4 What is an overdue fine? An overdue fine is a fine that is not paid to the Ministry within 28 days of being ordered by the court. There are two types of fines: Infringement fine an infringment issued by a prosecuting authority that has not been paid and is passed to the court for collection (e.g. parking ticket or speeding ticket); and Court-imposed penalty a penalty imposed by a Judge. A court-imposed penalty is sent to the Ministry immediately after the penalty is imposed. An infringement fine is sent to the Ministry between two and four months after it was first issued by the prosecuting authority, unless it has been paid. What is overdue reparation? Reparation is monetary penalty a Judge orders an offender to pay someone who has suffered emotional harm or had property lost as a result of a crime. Overdue reparation is reparation that is not paid to the court within 28 days of being ordered, or in accordance with the Judge s instructions. In many cases, people enter into arrangements to make payment towards their fines and reparation by instalment. Where this occurs the fines and reparation owing are not considered overdue. How many people currently have overdue fines and reparation? Approximately 250,000 people have overdue fines and reparation owing on any given day. Approximately 35% of people with overdue fines and reparation are aged years. More demographic information about Ministry customers with overdue fines and reparation can be found in the Appendix A and the accompanying spreadsheets. What happens if a customer disputes they have overdue fines and reparation? The Ministry has a large Contact Centre which deals with enquiries from customers who seek information about their fines and reparation, as well as making outbound calls to follow up customers who have overdue fines. Customers should be referred to call FINES to resolve the issue.

5 Super Priority - Q + As How will it work? Super Priority will give the court priority over secured property of a third party. If property is seized and sold by the court to enforce a customer to pay overdue fines and reparation, the court will get priority over the secured party for the proceeds of the sale. The priority is only for the value of overdue fines and reparation at the time of the decision to lend, less any subsequent payments for any of the customer s fines. Super Priority will not affect the court s current power to seize property. What will it apply to? Super Priority will apply to all securities, whether registered on the Personal Property Security Register (PPSR) or not, for decisions to lend made from the 1 st of May. How can I prevent Super Priority impacting on my business? You can prevent Super Priority impacting on your business by ensuring a customer does not have overdue fines and reparation at the point of a decision to lend. You can confirm this by seeking a credit report with the overdue fine information. This information will be valid for up to 28 days after the credit report is sought, for the purpose of protecting you against super priority. This applies even if the overdue fines and reparation balance subsequently goes up during that period. If the balance has gone down by the time of the lending, the lesser amount will be the overdue fines and reparation balance used in the super priority calculation. Super Priority will apply even if you do not seek overdue fines and reparation information for a customer via a credit report. If you don t seek overdue fines and reparation information for a customer via a credit report the Ministry will be able to retrospectively calculate the overdue fines balance on the day the lending took place. How can I get access to this information? Please refer to the How can I get access to this information? in the Credit Reporting of Fines Q+As. What happens if property is seized by the court? If your customer has no overdue fines or reparation at the point of a decision to lend and: you lend to that customer you create a security for the loan, and the property is seized by the court and sold you will need to make a third party claim, but the repayment of your security will be prioritised before any payment to the court.

6 If your customer has overdue fines or reparation at the point of a decision to lend and: you lend to that customer you create a security for the loan, and the property is seized by the court and sold the court will be paid the value of the overdue fines before the repayment of your security. You will need to make a third party claim to receive any repayment that may be available from the balance of sale proceeds after the super priority amount is paid. How will I know property has been seized? When the court seizes property it checks the PPSR and promptly advises a secured party, inviting them to make a third party claim. This takes place now and will not change. How will the super priority amount be calculated? The super priority amount will be determined using the following calculation: less Amount overdue at time of the decision to lend (or potentially 28 days before if you sought a credit report inside that period) Any amounts paid towards fines and reparation after the decision to lend = Super Priority the amount that the court receives for the overdue fine and reparation before the secured party is paid. What if the sale price does not cover the security? Property is generally sold at auction. Once the super priority amount is paid to the court, the balance is used to pay all or as much of the security as possible. If there is a shortfall in repayment of the security, that amount is still owed to the secured party by the debtor. How will the Ministry know we have made a decision to lend? The Court seizes a person s property to sell to pay their unpaid fines. It makes reasonable attempts to find out if there is any third party with a security interest in the seized property and advises the third party that the seizure has happened. The third party is required to make a claim for their security. This is the current procedure. In the future a third party claimant will be required to advise the court of the date of the lending resulting in the security (over the property that was ultimately seized). The Court may also request evidence of the date of the lending, such as a loan agreement. If no date of lending was provided the Court would be unlikely to accept the claim. To prevent any super priority the third party claimant will also need to provide a nil overdue balance from the Credit Check of Fines on the Credit Report.

7 A regular credit check for a previous credit line is not a decision to lend (it might be a decision to cease lending). As such, regular credit checks will not mean that a preexisting loan becomes liable to Super Priority, just because the debtor now owes a reportable fines balance. If the check is done with the anticipation of further lending (such as creating a higher credit limit), Super Priority might apply to the extent that the higher limit is a new lending decision. What happens to all loans given before the 1 st of May? Does the ministry have super priority? Only loans made from the 1 st Priority. May or later would be eligible for the Court to apply Super Does this new law apply to PPSRs registered before the 1 st or renewed or amended after the 1 st? Super Priority does not apply to security registered on the PPSR before the 1 st May. If the reason security was renewed or amended on the PPSR from 1 st May reflected new lending then super priority would apply. If further money is advanced within an existing credit facility, this is not a new lending decision. If the individual organizes a payment plan with the Ministry, we then lend to them on the basis fines are no longer overdue, then they stop payments to the Ministry, are we at risk of the ministry coming in with super priority and to what amount would it be? If payment plan is in place before the credit check, then no overdue fine balance will be reported in the credit check (provided the payment plan is for all fines) and no Super Priority will apply. If the payment plan is put in place after the credit check and payments stop, and property is seized, then Super Priority would apply to the amount of overdue balance at the time of the lending less any fine repayments made. Alternatively any third party could also prevent the sale of the seized vehicle by simply paying the total overdue amount on behalf of the customer. Does Super Priority include monetary security which is not listed on the PPSR? Also how would they know about the loans if no credit check or PPSR is done? Super Priority can apply to any security seized whether or not it is registered on the PPSR. If it is not registered the Court is reliant on the customer to tell us there is a third party in order for the Court to give the third party a chance to make a claim before the actual sale of the vehicle (7 days after seizure). There is always the possibility they could make a claim for the proceeds following the sale.