Preferred methods of recovery

Preferred methods of recovery

DVA allows the following methods of recovery with regards to VEA debts in order of preference:

• one off payment of full amount;
• one off payment of discounted amount;
• reductions applied from a person’s pension over time; or
• regular partial payments until full amount paid.

One off payment of full amount

Recovery of an overpayment in a one off lump sum is obviously the most efficient and economical method for the Commonwealth. 

In requesting a lump sum, a delegate should have reasonable regard to the amount of pension or other entitlements payable to the client, the client’s financial circumstances, and the client’s readily available funds.

One off payment of discounted amount

If a full refund is not possible but the client has readily available funds equal to or more than 80 per cent but less than 100 per cent of the total debt, consideration should be given to offering a discount of up to 20 per cent on the total debt. In all circumstances when this offer is made and accepted, the 80 per cent or more of the total original debt must be paid within 30 days. The discount on an original debt does not apply to a person who has already entered into a recovery plan.

The offer can be made in respect of all types of VEA debts, except where the client or the estate has the capacity to repay the debt in full or the overpayment was caused by fraud.

The remaining 20% of the overpayment must be waived by way of a written determination under s 206(1)(b) of the VEA. See the section on waiving debts below.

Deductions from pension payments over time

If a client is in receipt of continuing payments from DVA but is unable to repay the debt in a lump sum, instalments may be paid in the form of deductions from their pension.

Paragraph 205(2)(c) of the VEA authorises the recovery of an overpayment from any pension, allowance or pecuniary benefit payable to the client under the VEA.

A limitation amount may be applied automatically. The following table shows the portion amounts to be applied to debts:

Income for the purposes of determining the rate of limitation includes pensions from all sources. It does not include allowances such as rent assistance, remote area allowance and additional payments for children, but does include the non-indexed component of the war widow’s/widower’s pension.

When advising a client that recovery of their overpayment will be effected by limiting their pension, it is important to advise that the situation will be reviewed regularly. Limitations automatically generated by the Debt Management Recording System must be reviewed if requested by the client.

Regular partial payments until full amount paid

If a full or discounted or partial lump-sum repayment is not feasible, and the client is not in receipt of a pension, negotiations with the client should begin with a view to recovering the debt by regular instalments from other income sources.

Section 206(1)(c) allows a delegate to make a determination in writing that a debt be repaid by instalments. This determination should state that it was made under s 206(1)(c) and should set out the frequency and amount required to be repaid. The repayments should be monitored closely by the responsible business area. A schedule should be provided to the client outlining the repayments required and the balances due as time elapses.

The written repayment agreement with the client must explain that DVA will review the rate of repayment periodically. A review of the rate of repayment should be conducted if the client defaults on payments or if a change in circumstances is detected.

If DVA is aware that the client’s financial circumstances are going to improve—for example, a loan will be paid out or their income is going to increase—the repayment agreement should be reviewed. It should be noted, however, that DVA cannot unilaterally change an agreement reached with a client, particularly if the client is honouring their obligations under the agreement.

Deeds of Repayment

In order to formalise an agreement for repayment of debt within a specified period in specified amounts, DVA may wish to enter into deeds of repayment with the relevant DVA client.  A deed of repayment represents a legally binding promise from the debtor to repay the debt within a specified period.

The deed should include an acknowledgement of the debt by the debtor, which safeguards against the debtor disputing the liability for the debt.

The repayment obligations under the deed will give rise to a new cause of action against a debtor in the event they fail to meet their obligations, known as action for breach of a deed, and as for a breach of contract, remedies can include specific performance.

Consultation with the General Counsel Division must be made prior to this option being taken.