The Collections Process
As the operator of the lending Marketplace, we take the debt collection process very seriously. We manage any delinquent accounts through our own in house Collections team and our outsource partner, Dun & Bradstreet.See the process
The Collections Process
As the operator of the lending Marketplace, we take the debt collection process very seriously. We manage any delinquent accounts through our own in house Collections team and our outsource partner, Dun & Bradstreet.
How does Harmoney handle collections?
We follow an industry defined process, whereby we proactively contact the Borrower whose repayment dishonours via SMS, email, and telephone to attempt to get them back on track. We manage these delinquent accounts through our own in house collections team and our outsource partner, Dun & Bradstreet. By utilising two teams, we are able to ensure maximum performance and results.
If we are unable to collect from the Borrower within 120 days, the loan is considered defaulted and moves into a "charged off" status. In some cases, loans may not be charged off at 120 days if there is a reasonable likelihood of payments being made. If any payments are made after a loan becomes charged off, the funds are transferred to the Lenders, as they still hold a beneficial interest in the Borrower's loan.
What is the Collections Process?
We proactively start communicating with Borrowers 5 days prior to a repayment being due. Many of our Borrowers use a direct debit to pay their loan, but for those who don't, these reminders help to ensure repayments are made on time.
We understand that there will always be unexpected life events that can create disruptions and sometimes payments get missed. In the first 5 days Harmoney will make an attempt to contact the delinquent Borrower via:
- Email (first written notice)
During this time, a member of the Harmoney Collections team will be assigned to the delinquent Borrower.
Over this time period, further attempts will be made by the Collections team to contact the Borrower and arrange for immediate repayment. During this period a second written notice will be sent to the delinquent Borrower warning them of the consequences of late repayments.
It is at this point that Harmoney will consider sharing the repayment delinquency with New Zealand’s Credit Bureaus as part of CCR.
Over this time period, further attempts will be made by the Collections team to contact the Borrower and arrange for immediate repayment. During this period a third written notice will be sent to the delinquent Borrower warning them of the consequences of late repayments, including, but not limited to:
- Written Letter of Notice
Notice of adverse credit may also be passed to New Zealand's Credit Bureaus at this point.
The Borrower is now in breach of their repayment obligations under their Harmoney contract, and the case is reviewed for legal action. Further to this, a 'Notice of Demand' is issued to the Borrower.
If no attempt at resolution is made, the case is handed to our Recovery Team. However, at this point the aim is still to retrieve repayment, and the Collections team will continue to work with the delinquent Borrower to reach an amicable solution.
A second written 'Notice of demand' is issued, as well as numerous further attempts at resolution.
This is the final opportunity for the Borrower to resolve the situation prior to further enforcement steps being taken. Failure to make payment at this stage may result in the commencement of legal action, and the lodgement of a default with New Zealand's Credit Bureaus.
This stage represents the last possible stage for a Borrower to make repayment before legal action is commenced.
If no attempt at reparation is made, the loan will move into a 'Charged Off' state, and the case handed over to an outsourced recoveries team. If applicable, Harmoney will also begin legal proceedings.
If Borrowers find themselves unable to reasonably keep up their loan repayments due to unexpected life event, they can apply for Unforeseen Hardship.
Unforeseen Hardship can happen due to illness or injury, a major life event (e.g. death of a loved one, loss of employment), or another reasonable cause.
Once Harmoney receives an application, and we determine that we have all the information we require, our team will assess the application and make a decision on whether or not to approve the application for Unforeseen Hardship. If the application is successful one of the following will happen:
- The Borrower may receive an extension to the term of their loan – this will reduce the amount they pay with each repayment, but increase the number of repayments;
- The Borrower may have some of their repayments postponed for a set time; or
- The Borrower may get a combination of the two – i.e. an extension of the loan term, and a postponement of some repayments for a set period of time.
Not all applications will be successful, and there are stringent criteria that a Borrower must fall into in order to have Unforeseen Hardship granted.
Ultimately, it’s important to remember that Borrowers who have their contracts varied, because of Unforeseen Hardship will still repay their loan in full – it may just take longer than initially expected.
First Month Delinquencies
First payment delinquencies can be common within lending, as Borrowers attempt to arrange repayments around their monthly pay schedules, and establish a direct debit. This is typically because Borrowers are so focused on completing their loan application, rather than thinking about the date for their loan repayments to come out. In these cases, the Borrower is contacted by our Collections team and a new repayment schedule is established. The account will typically move back into "current" within a week.
What does it mean when a loan is “Charged off”?
A charged off status indicates that a Borrower has defaulted on their loan, primarily due to bankruptcy, sickness, job loss, death, or other unforeseen circumstances. Typically, this means that we’ve exhausted our collections efforts and there’s a low statistical likelihood that we’ll be able to collect any funds from the Borrower; resulting in a capital loss for Lenders.
We have forecast a 4% static loss across the portfolio over the life of the loan. This means that out of every $100 invested, you could expect $4 to charge off. You can view our current loss statistics here.