Written by Condon Associates on 12 April 2010

Last week while listening to the radio I heard a news report that stated that the credit reference body, Veda Advantage, had released figures that indicated that Australian consumer credit was now back at pre GFC levels.

However, now 19 percent of borrowers were experiencing difficulties in meeting their monthly credit card repayments. This figure is almost one fifth of the Australian population and amazingly this was reported BEFORE last week’s interest rate increase!

One often asks: “What does it take for some people to learn?” This is not just a question for the borrower to contemplate but also the credit provider, because they get the most upset when they do not get their money back.

I remember one matter many years ago when I was dealing with a serial defaulter in the building and construction industry. When we arrived on the scene there was little left to recoup and the owner had already moved onto his next entity – and yes it was in the same game.

When it came to the meeting of creditors, some 12 months after the initial appointment, it really was to only set out the results of the investigation, acknowledge that they had been reported to ASIC and that no action would be taken by ASIC and to have the fees approved.

The meeting quickly became a hornet’s nest with all of the creditors present wanting to know where the funds had came from so that the director could establish the new entity. The meeting was adjourned to enable the additional investigation to be conducted.

With the assistance of the old (and new) company accountant we were able to establish that within 21 days of opening, the new business had been provided with non bank trading facilities of almost three quarters of a million dollars. Certainly a comfortable sum to start a new business!

When this was reported back to the creditors they were stunned, but when it was indicated that virtually every creditor present was amongst those that provided the new funding, talk very quickly moved to how competitive the industry was and that they would fail if they did not do so.

Lending money is good but it takes both parties to be responsible.

In the face of a retail sales downturn in February, we got an interest rate rise and we have been promised more! Have we really properly assessed our ability to recover or is it more important that we make a sale today, whether or not we get paid tomorrow?

Wasn’t there once a tale about a ‘bird in the hand’?