What you can and cannot do when engaging in debt collection activity

Many clients are not aware that creditors, debt collection agents and solicitors engaging in debt collection activity are governed by national guidelines, specifically the Debt Collection Guideline for Collectors and Creditors (the “Guideline”) which was last updated in April 2021.

The Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) jointly produce the Guideline. ACCC and ASIC enforce Commonwealth consumer protection laws, including laws relevant to debt collection.

The Guideline applies to both creditors who are directly involved in debt collection and to specialist external agencies who provide debt collection services. Therefore, not only are debt collection agents and solicitors restricted in their behaviour when engaging in debt collection activity but anyone that is a creditor engaging in their own internal debt collection activity is governed by the Guideline. Therefore, every client that issues invoices and engages in activity to collect on those invoices should read, know and understand the Guideline.

Some of the main guidlines to be aware of are:guidelines to be aware of:

1. Fair Debt Collection Practices: Debt collectors must act fairly, reasonably, and without harassment or coercion. They should not use deceptive or misleading tactics to recover debts. This includes not making false statements or threats, misrepresenting their authority, or contacting debtors at unreasonable hours.

2. Privacy and Confidentiality: Debt collectors must comply with privacy laws and protect the personal information of the debtor. They should only disclose information to the debtor or their authorized representatives.

3. Contacting Debtors: Debt collectors should make reasonable attempts to contact debtors and provide sufficient information regarding the debt. They should not contact debtors at unreasonable hours, such as early mornings, late nights, or on public holidays.

4. Dispute Resolution: Debt collectors must have a process in place to handle disputes and complaints. If a debtor disputes the existence, amount, or validity of the debt, the debt collector should investigate the matter and provide appropriate evidence or documentation.

5. Financial Hardship: Debt collectors should be aware of a debtor’s financial hardship and must provide assistance when appropriate. They should consider alternative payment arrangements or refer debtors to relevant support services if necessary.

It’s important to note that these guidelines are not exhaustive, and there may be additional rules and regulations depending on the specific circumstances and jurisdiction. If you’re facing debt collection issues, it’s recommended to seek legal advice or contact organizations like the ACCC or ASIC for further assistance.

Furthermore, a creditor may be responsible for their agent’s collection activities even if the agent acts in a way that is contrary to an agreement or understanding between the creditor and agent about how the collection is to be undertaken.

What ACCC and ASIC do

• They accept reports, complaints and enquiries about debt collectors.
• They review reports and complaints from the public and act if they identify concerning behaviour.
• They educate consumers and businesses on their rights and responsibilities.

How debtors should be treated

People who owe money are commonly referred to as debtors. Debtors, and others connected to a debt, should be treated with fairness, respect and courtesy.

A debt collector should only contact a debtor for a reasonable purpose and only when necessary.

Illegal behaviour and debt collection

Under Australian law, a creditor or a debt collector must not:

• use physical force
• use coercion
• unduly harass or hassle the debtor
• mislead or deceive the debtor
• take unfair advantage of any vulnerability, disability or similar affecting a debtor. This can amount to unconscionable conduct.

These laws also apply when contacting anyone connected to a debtor. This includes a spouse, partner or family member.

Creditors and debt collectors must protect the personal information of debtors and third parties. The Office of the Australian Information Commissioner may act if a debt collector or creditor has broken privacy laws.

When and how a debtor can be contacted

Acceptable reasons for contacting a debtor

There are situations where contacting a debtor may be reasonable.

• Giving information about the account and money owed
• Making a demand for payment
• Accurately explaining the consequences of non-payment, such as legal remedies the debt collector or creditor can seek, or service restrictions that may apply, such as disconnection of a service
• Arranging for repayment of a debt
• Suggesting a payment plan
• Reviewing existing payment plans after an agreed period
• Finding out why the debtor has not responded to contact
• Asking why an agreed repayment arrangement is not being followed
• Investigating if the debtor has changed their address without informing the debt collector when there are grounds for believing this has occurred
• Sighting, inspecting or recovering a security interest, such as a vehicle.

Contact with a debtor should be limited to:

Visits to a debtor’s home, or another agreed location, should be a last resort. The debtor can also ask for, or agree to, a visit.

If repayment plans can be worked out over the phone or in writing, face-to-face contact should not be needed.

Improving debt collection compliance

ASIC and ACCC review reports and complaints from consumers and small businesses and act when they identify concerning practices.

The joint ACCC/ASIC Guideline includes information about debt collection best practices.

Consumers and businesses can report debt collectors to ASIC or ACCC if they are:

• doing something they should not do
• harassing or intimidating a debtor
• misleading a debtor.

Please click this link to access the full ACCC/ASIC Debt Collection Guideline.

Should you have any queries with regard to debt recovery, compliance and your own internal policies and procedures please do not hesitate to give us a call.

Reference Tools

ACCC/ASIC Debt Collection Guidelines

ACCC website

ASIC website

Disclaimer: When researching and drafting this article we may use an AI advanced language model amongst other sources. It is intended for general informational purposes and should not be used as a substitute for professional advice. While every effort has been made to ensure the accuracy and reliability of the information provided, we cannot guarantee its completeness, timeliness, or appropriateness for any particular purpose. Usage of this information is at the reader’s own risk. We are not liable for any errors, omissions, or results that may be obtained from the use of this information. Always consult with a qualified professional before making any decisions based on the content of this article. For legal advice please contact Paul Thorndike on 0429 008 247 or at paulthorndike@nswcreditlaw.com.au