Am I a ‘Debt Collector’?
Ask yourself this question…
Am I a ‘Debt Collector’?
You might be surprised by the official answer. A common misconception is that only a debt collection agency or its employee is a ‘Debt Collector’. The truth is that if you conduct any activity in the course of business where you are required to request payment of a bill or an account from another person or another business then…
YES – you are a ‘Debt Collector’.
All debt collectors need to have a thorough understanding of and apply the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) Debt Collection Guidelines. The ACCC and ASIC enforce Commonwealth consumer protection laws, including laws relevant to debt collection.
The ASIC/ACCC Debt Collection Guideline (the Guideline) defines a Debt Collector as:
‘Debt Collector’: a person collecting a debt in the course of a business. It includes creditors, independent collection agencies, collections departments within businesses, debt buy-out companies, assignees, agents, lawyers, government bodies engaged in trade or commerce, and other persons collecting on behalf of others.
Therefore,
- A Strata Manager that contacts lot owners to encourage them to pay overdue levies is a ‘Debt Collector’.
- A Credit Manager for a financial service provider that contacts customers regarding overdue loan repayments is a ‘Debt Collector’.
- An Accounts Receivables Manager for a commercial goods or services sold and delivered operation is a ‘Debt Collector’.
- A sole trader, small business owner, when contacting their customers to request they make payment of bills is a ‘Debt Collector’.
- A Lawyer engaging in debt collection activity on behalf of a client is a ‘Debt Collector’.
So now you have identified that you are a ‘Debt Collector’ ask yourself the following questions:
- Am I complying with the Guidelines?
- Am I breaching my obligations under Australian Consumer Law (ACL) or privacy laws?
- Do I have a thorough understanding of the Guidelines?
If your answer to question 3 is – NO – then now is the time to familiarise yourself with the Guidelines and/or undergo some formal training. Failure to comply with the Guidelines could result in damage to your business’s reputation, costly repercussions such as adverse orders and fines to the business and/or its employees. ASIC and ACCC regularly publish media releases making examples of businesses that have failed in their obligations under the Guidelines.
Australian Consumer law
The ACL provides protections for consumers and business owners that all debt collectors should be aware of and comply with on a daily basis. These protections are included in the Guidelines but form only a minuscule amount of the knowledge contained therein that debt collectors need to know.
- Section 50
A person must not use physical force, undue harassment, or coercion in connection with the supply or possible supply of goods or services or the payment for goods or services.
Case study – ACCC v The Maritime Union of Australia [2001] FCA 1549
The meaning of the term ‘undue harassment’ has been explained as follows:87 “The word ‘harassment’ means in the present context persistent disturbance or torment. In the case of a person employed to recover money owing to others … it can extend to cases where there are frequent unwelcome approaches requesting payment of a debt. However, such unwelcome approaches would not constitute undue harassment, at least where the demands made are legitimate and reasonably made. On the other hand, where the frequency, nature or content of such communications is such that they are calculated to intimidate or demoralise, tire out, or exhaust a debtor, rather than merely to convey the demand for recovery, the conduct will constitute undue harassment. … Generally, it can be said that a person will be harassed by another when the former is troubled repeatedly by the latter. The reasonableness of the conduct will be relevant to whether what is harassment constitutes undue harassment”.
- Section 18
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Case study – ACCC v Excite Mobile Pty Ltd [2013] FCA 350.
A company was found to have engaged in misleading and deceptive conduct when it attempted to obtain payment for services. The court found the company misled and deceived debtors to believe their complaints and disputes were being considered by an independent third party when this was not the case. The court also found the company misled and deceived debtors by demanding payment under the false pretences of a fictitious debt collection agency. The company also made misrepresentations as to the nature of the orders a court would make if proceedings were commenced to recover late payment. The court also found the company acted unconscionably and ordered the company to pay penalties of $550,000 and its two directors $55,000 and $45,000. The court disqualified the directors from managing a corporation for a period of three years and two and a half years, respectively. An employee who was involved in the conduct was also ordered to pay a penalty of $3,500.
- Section 20
A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time.
Case study – ACCC v Excite Mobile Pty Ltd [2013] FCA 350.
A company was found to have acted unconscionably when it used unfair tactics to obtain payment, such as creating a fake complaint handling body and a fake debt collection agency to manipulate and pressure debtors into paying alleged debts. The court also found the company acted unconscionably by using scare tactics and unfounded claims to deter debtors from non-payment, including that if proceedings were commenced the court would order the debtor to pay a certain amount of compensation to the creditor for failing to pay on time and that any assets belonging to the debtor would be repossessed.
In Summary
This article has touched on only one small section of the Guidelines. Anyone engaged in collecting a debt in the course of a business needs to have a thorough understanding of the Guidelines and make sure they comply with every aspect on a daily basis in the course of their accounts receivable activity.
The ACCC and ASIC have jointly produced the Guidelines which aim to assist creditors, collectors and debtors understand their rights and obligations, and ensure that debt collection activity is undertaken in a way that is consistent with consumer protection laws.
The guide was originally published in 2005 and has been updated to reflect significant changes to the law, such as the introduction of the Australian Consumer Law in 2011, the National Consumer Credit Protection Act 2009, and privacy laws and principles.
The latest publication of the ASIC ACCC Debt Collection Guidelines 2021 can be accessed via the link below:
http://bit.ly/nswcreditlawdebtcollectionguidelines
Should you require any guidance with regards to this or any other article published on our website please contact Paul Thorndike 0429 008 247.
Articles are intended as general information only and should not be considered to be specific legal advice.
REF: ASIC ACCC Debt Collection Guidelines 2021