New Zealand student loans

IRD on overseas students' scent for loans

The long arm of the taxman is about to get even longer as the Inland Revenue Department looks to private debt collectors to recover millions owed on student loans in Australia and Britain.

Stuff,

1 April, 2012

Earlier this month, Prime Minister John Key announced the government was going to rein in the student loan scheme "in a big way", but government officials were not prepared to elaborate on how they planned to do that, saying there would be a further announcement.

Part of the strategy has now emerged after the Inland Revenue Department went to market seeking information from debt collection agencies.

A document issued by the department says part of its approach to tracking, contacting and collecting overdue student loan debt from borrowers is "investigating the ability of the private sector to provide debt collection and associated services in overseas jurisdictions".

IRD manages the loan accounts of just under 621,000 borrowers with a loan balance of more than $12 billion. At the end of June 2011, $411.6m in repayments were overdue, up from $324.7m in 2010. Borrowers living overseas owed $288.9m in overdue repayments.

Responses from the private debt collectors will help IRD formulate what services can be provided and where.

"Private sector suppliers are expected to have experience, expertise and other advantages not currently available to Inland Revenue, ie they may be based in, or have access to, the jurisdictions Inland Revenue is seeking to access," the document says.

IRD is not seeking to specify its future requirements at this stage, but to learn what the market place is currently doing or can offer.

Potential outsourced delivery of debt collection could include services such as tracking and tracing debtors, collecting overdue student loans from borrowers "using a normal range of debt collection activities" and undertaking legal activity to support debt collection, including process serving of documents, and advising IRD on local laws and regulations.IRD asks respondents to explain how the security of Inland Revenue and customer information would be ensured, covering security protocols and mechanisms for transmission, storage and destruction of information.

"The information gathered through the RFI [requests for information] will primarily be used to assist in the development of a sourcing strategy for debt collection and associated services," it says.

If the department decided to go ahead with a tender, this would likely start in mid to late May.

The move is among changes flagged under the Student Loan Scheme Amendment Bill. The bill, if enacted, will allow IRD to access alternative contact details for borrowers to help track them down.

Students applying for loans will be required to nominate a third party to maintain up-to-date contact details to be provided to Study Link.

Another change is to shorten the repayment holiday available to borrowers travelling overseas from three years to one year.

It would also change the way income is calculated by not allowing the deduction of losses before repayments are assessed.