Contacted by the Otago Daily Times for a state-of-the-economy interview, Mr Young, a director of his Dunedin-based company Debtworks, was not optimistic about the future for households facing increased pressures from rising food, petrol, energy and mortgage costs while trying to also pay hire purchase agreements.
"All of this factors into higher default rates. We will get busier. Smart business operators are looking at their current credit procedures and starting to do something about it.
"The ones that are not smart will find defaults start to affect their cash flow - soon." People defaulted on their debts in reverse to their priorities, he said.
Priorities were a roof, food and warmth. Things of less importance were the first things to be defaulted on. Usually, the first default came through unpaid car repair bills.
People would pay their Sky television bill before the car repair bills because they wanted to watch Sky that night and their car was already fixed.
That was the usual pattern for male defaulters who also kept up their car finance repayments, aware that if the car was repossesed they would have very little chance of getting more finance to buy another one, Mr Young said.
Female defaulters were more likely to default on household assets because they were easily replaced through second-hand purchases.
Anecdotal evidence from his members suggested that things were getting tighter for households but no-one was suggesting a panic situation, he said. The time to pay had stretched from 53 days to 55 days which was only a small movement, but one in the wrong direction.
People who could not pay were sometimes using the no-asset protection law which meant that if you owed less than $40,000 you could go bankrupt for a year then walk away from your debts, Mr Young said.
That action was proving short-sighted because while the Insolvency Service website kept the information online only for the term of the 12-month bankruptcy, credit rating agencies kept the information on file for six years.
"They think they can have a nap for a year then start again. But this bankruptcy follows you for six years so if you want to buy a house in five years you will have to so some pretty fast talking to the people you want to give you a mortgage."
The best action to take if you started to feel a credit squeeze was talk to your creditors early to stop a small problem becoming a much larger one. Creditors were usually willing to help someone making a genuine effort.
On a wider scale, the finance company sector was still undergoing intense changes, Mr Young said.
"It's not all over yet. There are still some companies in not a sound position. We are not finished with collapses yet. Everyone is reinventing themselves - changing the way they operate."
The demand for money was still there from the public and retailers.
The three types of finance companies operating now were -
• Those owned by banks which were experiencing boom times, picking up business when other finance companies failed.
• Finance companies governed by a covenant which usually came from a bank. If the bank's criteria were met, they kept lending. Those companies were also picking up business from across the wider market.
• Debenture-type finance companies which were trying to refinance from sources other than investors. One of those had recently secured $50 million from Scotland which was being used to replace debenture finance instead of being used for expansion.
What was interesting was the level of defaults caused by mortgage stress as households refinanced their mortgages at higher fixed rates, Mr Young said.
More high-performance cars were being advertised for sale, a sign that "rich boys" could not afford their toys.
For Debtworks, there had been a higher level of inquiries in debt collection but also an increased level of business in credit management services.
Businesses were asking for someone to act when an account was 30 days overdue to try to stop the situation from getting worse, he said.
