Students fear gangs will be used to make them pay education loans

A New Zealander with student loan debt, living in Australia, says he's worried gang members are going to come knocking on his door, after learning Inland Revenue is calling in debt collectors.

The IRD has confirmed it is asking for tenders from third-party debt collectors who will attempt to recover student loans from borrowers living overseas.

"We are currently going through a formal tender process for a private sector agency to provide debt collection and associated services in Australia and the United Kingdom," a spokeswoman said.

"This work will include tracing, debt collection, document serving and legal services."


She could not put a number on how many borrowers would be targeted but said anyone who had not kept IRD up to date with contact details would be in their sights. Third parties would also carry out collection and legal activity, particularly where people had consistently not made repayments.

But Tim Rose, a student loan borrower in Australia with $50,000 of debt, said there had been an outcry there when a private company, Visy Industries, was accused of using Hells Angels members to collect debt.

The Herald Sun reported that police intelligence recorded links between Visy and the gang, and had found other gangs and underworld figures were acting as debt collectors. In Victoria, debt collectors do not have to be licensed.

Rose said there was nothing to stop any third parties the IRD used subcontracting the work to unscrupulous types. He took out a $16,000 debt that had ballooned over the past 20 years as he had never earned enough to be able to pay it back.

When he applied for leniency on the grounds of financial hardship, a call centre representative told him she was giving him a "heads up" that the IRD would be engaging third parties. "It seemed like a veiled threat."

The 91,000 student loan borrowers living overseas owe about $2.5 billion, with total student loan debt more than $12 billion.

People going overseas get a holiday of one year before they must start making repayments.

The spokeswoman said the third-party involvement fit within a wider programme that had been running since 2010 to follow up overdue repayments from borrowers living overseas.

Methods used included direct contact by Inland Revenue staff, debt collector trials, online advertising, legal activity, and providing online payment options.

As at October 2012, Inland Revenue has collected more than $42 million in payments from overseas-based borrowers.

Debt collector trials had netted a return of $11.50 for every dollar spent.

"This amount is money we otherwise would not have collected if we didn't have the initiative in place."

She urged people facing financial difficulty to get in touch. "If a borrower needs assistance or is facing financial difficulty, then they need to contact us. We can assist in setting up repayment plans to help borrowers get back on track and make their loans more manageable."

In August it was revealed that the IRD would consider bankruptcy proceedings against overseas-based student loan borrowers who had not paid.

Documents released under the Official Information Act show IRD has taken legal action against 360 people in New Zealand and 38 borrowers who live overseas, most in Australia.