The fact is there are very few debt negotiators in Australia, this classifies the industry as very boutique.
So what is debt negotiations?
The role of a debt negotiator is to convince their client’s creditors (banks, Australian Tax Office etc.) to write off part or all of the debt owed by their client. They can do this without the forcing hand of the Bankruptcy Act and use their refined negotiation skills, industry contacts, legal & industry knowledge and client’s background to achieve spectacular results for their client.
For example, a $25,000 credit card debt with Citibank can be reduced to $5,000 if Citibank is presented with a powerful enough argument, such as possible compliance errors by the bank, client hardship and a multiple of other reasons.
The Debt Negotiation Industry in North America and Europe works differently to Australia and are well established within their communities.
Not so in Australia, you can count the true independent debt negotiators in Australia on two hands, the main reason for this is legislation.
American banking codes legislate banks to deal with debt negotiators much the same way Australian banks are legislated to work with insolvency specialists. However a debt negotiator does not have the benefit of legislation to strong arm a bank into an agreement (unless the negotiator uncovers a creditor’s non-compliance to a code like the NCCP).
Therefore a creditor can simply reject an offer made by a debt negotiator, by anyone, whether the rejection makes no financial sense or not. So a debt negotiator must excel at negotiation skills to achieve the mammoth savings required by their clients and cannot rely on codes to force the banks hand.
The skills required to do this are not common and you’ll observe negotiators background will usually be banking, legal and professional debt recovery. This makes sense considering debt negotiators will usually be sparing with bankers, lawyers and debt collectors. Additionally a debt negotiator must have a unique temperament to coolly navigate through very heated and often subjective arguments by creditors.
Typical savings by debt negotiators will approximately be 50% off from their client’s debts; however they will routinely have debts reduced to nil depending on their client’s profile.
Ethics are important to debt negotiations. When speaking to a new client the negotiator will ask themselves “can I save them money, should I save them money?” A father’s debt owed to child support, a directors debt to employees superannuation, money withdrawn from the credit card last week with the intention of not paying it back?
There is one case where a client owed $28,000 on credit cards, she had over $300,000 cash in her bank and wanted the negotiator to reduce her credit card debt!
Every negotiator must consider the ethics of each case they take up. If they submitted a proposal with questionable ethics then they will be disgraced in the eyes of the creditors and professional reputation is hard currency within this industry.
Debt negotiators can be hard to find. Many people who are looking for this kind of service end up stumbling into a bankruptcy practitioner and find themselves tied to a Part 9 Debt Agreement. Debt Agreements are not all bad but they do not always deliver what is promised or very difficult to adhere to its conditions.
If you’re looking for a debt negotiator it’s best to ask your local accountant or broker who they use to negotiate debts. You can google it but be careful as some ranking companies on this topic are insolvency specialist, which is fine if you’re looking at a bankruptcy option.
The negative side to debt negotiations is that some specialists can be expensive. However if there is a guarantee in place such as a “no win no fee” policy and you expect to save a considerable amount of money then it may well be worth it for you.
The other disadvantage is that you will need to raise funds to make the offer of settlement if your specialists are dealing with a bank or trade creditor. This means if you want to offer 20 cents in the dollar you must raise this money ready to pay when your creditors agree to the offer.
However in the end debt negotiators will generally provide their services without the client risking their house, business, and their credit rating. Additionally if you have the right profile you will have your debt dramatically reduce with guarantees in place and without you investing upfront cash for the service.
Laurence Hugo is the director of Credit Mediation Service Pty Ltd and has worked in debt negotiations for 25 years and pioneered the Debt Negotiation Industry in Australia. Credit Mediation Service Pty Ltd have assisted thousands of families and businesses get out of debt and has overseen the forgiveness of tens of millions in debts. Laurence Hugo has also worked with the homeless through Wesley Mission and for 7 years performed suicide / mental health training for counsellors with Sydney Life Line.