Assessing a failed loan 108-04020020

Advise the customer that their file will be sent to the Complex Assessment Officer (CAO) for a recommendation on whether or not the loan is a failed loan and can be disregarded as an asset or if a value less than face value can be accepted.

Collect as much information from the customer as they can provide. A minimum amount of information should be:

• investment reference number (commercial loans)
• name of borrower
• security provided by the borrower
• details of current status
• outstanding amount of the loan
• any correspondence issued by debtor or other relevant source
• evidence of legal recovery action, court action, advice from the liquidator

For any correspondence, the customer should be advised to provide this information to their relevant Service Centre.

The customer must supply evidence that the loan is irrecoverable. There must be overwhelming evidence that the loan is irrecoverable both now and in the future. It is not accepted that a loan cannot be repaid unless legal action has proved the debtors inability to repay.

The CAO will require either a judgement from a court of law or detailed evidence from the liquidator that there is no prospect of repayment of any part of the loan for it to be disregarded. A loan may still have some value, but less than the face value. The CAO may accept a value advised by the liquidator or court.

Has the customer given evidence that the loan is irrecoverable?

• Yes, go to Step 3
• No, request the details verbally or in writing and give them a reasonable timeframe to respond
  • Procedure ends here until they respond or the allowed time has lapsed

Has the CAO completed an assessment?

• Yes, go to Step 4
• No, when evidence is given by the customer, refer to a CAO
  • Procedure ends here pending the CAO assessment

Where the CAO assessment is completed and required action taken (if not already coded by CAO as part of the report):

• Code or update the loan details (as determined by the CAO report) on the Direct Investments (SVDI) screen
• Access this screen by typing 'SVDI' in Nxt: field

• Key the name of the organisation and the name of the investment in the Investment Name: field
• Key the account number for the direct investment in the Account Number: field
• Key 'LON' (as the type of investment) in the Type: field
• Key the balance of the direct investment in the Balance: field
• Key the interest for the direct investment rate in the Interest %: field
• If the saving is owned in conjunction with the customer's partner, code the percentage owned by the customer and their partner in the %Owned Client/Partner: field
• Key the date of event in the Event Date: field
• Key the date the direct investment was made in the Investment Date: field
• If there is an amount which is deductible from the balance of the account, code that amount in the Assets Test Deduction Amt $: field
• If the product is exempt from deeming, code a valid field code in the Deeming Exempt: field
• Key the source of the information in the Source: field
• Key the date of receipt of the information in the DOR: field
• Press [Enter]

The Savings Summary (SVS) screen displays showing the updated savings.

Complete the activity on the Assessment Results (AR) screen.

• If the loan has a reduced value, it may still need to be assessed under the rules for a deeming exemption if the deemed income affects the customer's rate of payment
• If the loan is assessed as being a failed loan then it is no longer assessed as an asset
• Record details on a DOC