Lessons learned: Techniques for reducing remuneration approval applications

Since 2010, the Inspector-General has had the power to approve a trustee’s remuneration. This power is generally exercised where a trustee has sought creditor approval, but has been unsuccessful. An analysis of our data tells us that the applications are increasing and are not evenly spread amongst the trustee population – that is, some trustees make numerous applications and others make only a few or none. Where possible it is our preference for the ‘market’ to price and approve a trustee’s remuneration. After all, it is the creditors who generally bear this cost (section 153A annulments are the exception) and on whose behalf the work is being carried out. We wanted to understand the apparent disparity by learning from trustees who make few or no applications.

Please note: AFSA does not draw a negative inference about trustees who have cause to make numerous applications for approval. There are a variety of reasons as to why it might be necessary to make applications for approval, and it is part of a bigger picture concerning creditor disengagement.

Mr Stewart Free was one of the trustees who responded to our questions. He has agreed for us to share his responses, which are reproduced below.

Do you have any general comments or tips you can share about your capacity to have remuneration approved?

When there is an engaged creditor, usually a person (in their own capacity or a private company) it is important to communicate with them. Generally engaged creditors are more likely to respond to reports both positively and negatively.

Unfortunately there are a lot of cases where only banks, credit providers and ATO make up the vast majority of creditors. In these cases there are a select few banks and credit providers that will never respond irrespective of the amount of times you call them. It is better to give these creditors more time to respond i.e. 20 business days instead of 15 business days. This will result in a greater chance of a response. The ATO for instance, have advised that they generally take 28 days to respond.

The amount charged also needs to be reasonable compared to the work done. You should be able to justify your charges and the approval sought should be commensurate to the work done.

Do you find following up Remuneration Approval Reports with a telephone call helps?

Yes. Calendar reminders are generally set approximately a week before the due date at which time staff follow up reports and kindly request a response from creditors in cases where no response has been received.

Do you find that a creditor’s willingness to approve remuneration is a form of return from investing in developing trusted working relationships?

Yes, generally.

Do you find that debt-purchasing creditors who are unwilling to disclose their consideration and therefore unable to vote represent a barrier?

I have generally found debt-purchasing creditors not to be helpful.

These type of creditors are not particularly active in responding to fee approvals unless it is in a S73 or PIA and when they do respond in these scenarios, certain debt-purchasing creditors never disclose the consideration that they purchased the debt resulting in their inability to vote.

Do you find there is a difference between creditors’ attitudes depending on whether the administration type is a DP or a CP?

No, not really. Petitioning creditors can be as unresponsive as banks. However, if the petitioning creditor is responsive, they will usually respond to reports both positively and/or negatively depending on the case and the work done.

Bryce Tomiczek

Senior Inspector – Regulation