Do you have a lot of debt collection agency FAQ? Is there a lot you want to know?
This ultimate guide to debt collection agency FAQ will help you understand the process, your rights, and how to deal with certain debt collectors.
Learn how to negotiate a payment plan with us, pay a debt, and to protect your credit rating.
With this comprehensive guide to dealing with debt collectors, you'll be equipped to handle less-reputable debt collectors like a pro.
What is a Debt Collection Agency?
A debt collection agency is a company that is hired by creditors (a person who is owed money by a debtor) to collect unpaid commercial debts on their behalf, or on behalf of their business.
The ultimate goal of a good debt collection agency is to recover any outstanding commercial or business debts and, in some cases, to also recover any additional fees, interest, or debt collection / legal costs.
A debt collection agency such as Advance Debt Collection uses a number of different methods to attempt to collect debts from commercial debtors. This can include sending letters of demand, making phone calls, negotiating payment plans for weekly or monthly repayments, organising and negotiating settlements, and/or taking legal action in the Court by filing a claim and statement of claim (if necessary).
What is Debt Collection?
Debt collection is the process of attempting to recover unpaid commercial debts from individuals or businesses.
It is a common practice in business and can involve a range of debt collection activities, from sending letters and making phone calls to taking legal action.
The goal of debt collection (by using a debt collection agency) is to recover the outstanding debt (such as unpaid invoices) and attempt to recover any additional fees or interest charges that may have accumulated (if applicable).
Debt collectors (such as Advance Debt Collection) are usually hired by commercial or business creditors to help to recover unpaid invoices from the debtor.
In some cases, business creditors may also try to collect the debt themselves, through their own in-house debt collection department or accounts receivable.
The process of debt collection typically begins with a creditor (or debt collection agency) sending a letter of demand or making a phone call to the debtor demanding that they pay the unpaid invoices, or enter into a repayment plan by informing them of the outstanding debt and requesting payment of the overdue amount(s).
In Australia, debt collectors are required to follow certain laws, rules and regulations when attempting to collect a debt. These rules are established by the Australian Consumer Law (ACL) and the Debt Collection Guideline: For Collectors and Creditors.
Debt collectors are required to provide certain information to the debtor, such as the amount of the debt and the name of the creditor.
If the debtor disputes the debt or requests validation, the debt collector is required to provide proof that the debt is valid and owed by the debtor.
If a debt collector is unable to collect the debt through traditional methods, they may take legal action against the debtor.
This could involve filing a claim and statement of claim in the Courts and obtaining a judgment against the debtor.
Debt Collectors and COVID-19
The COVID-19 pandemic had a huge impact on the debt collection industry and has resulted in a lot more debt being uncollected, and perhaps uncollectable.
In response to the economic downturn and the closure of businesses caused by COVID-19, creditors and debt collection agencies had to temporarily pause or reduce their debt collection activities.
This is because COVID-19 led to a huge decrease in the number of debts being collected, and the number of claims being filed in the Courts, because the Australian State and Federal Governments implemented the following:
- bans on evictions and collection of rent arrears.
- the issuing of bankruptcy notices, and statutory demands.
Both of which affected the amount of debt that is outstanding, especially to the Australian Taxation Office.
Debt Collectors and Technology
Technology is increasingly being used in the debt collection process. Automation can streamline the process of collecting debts and make it more efficient, allowing collectors to handle larger volumes of debts more quickly.
Tech-powered debt collection systems (such as the ones we use at Advance Debt Collection) can analyse data such as payment history and credit scores, to identify patterns and predict which debts are most likely to be collected.
Automation and technology can also be used to assist with certain tasks in the debt collection process, such as sending letters and making phone calls or text messages.
This can allow collectors to focus on more complex tasks, such as negotiating payment plans and/or settlements.
Overall, the use of automation & technology in the debt collection process can help us to improve efficiency and effectiveness.
Debt Collection Agency and Social Media
Debt collection agencies (such as Advance Debt Collection) are using social media more and more to track down and contact debtors.
By searching for the debtor's name on social media platforms such as LinkedIn, Twitter, Instagram, and Facebook, a debt collection agency can often find information that can help them locate the debtor, verify their contact information, and potentially look for assets to seize.
Once the debt collection agency has located your debtor on social media, they may attempt to contact the debtor through the platform, either by sending a private message or by posting a public message.
Our legal partners have also obtained an order for substituted service via a social media platform (amongst others).
Collectors may also use social media to obtain information about the debtor's assets, financial situation, or current/past employment, which can help them determine the best course of action for collecting the debt.
While using social media can be an effective tool for collectors, it also raises concerns about privacy and the potential for collectors to harass or intimidate debtors.
Debt collectors are subject to the same laws and regulations when using social media as they are when using other methods of communication, and must ensure that they are not using abusive, deceptive, or unfair practices when collecting a debt.
Debt Collectors and Consumer Privacy
To a debt collection agency, consumer privacy is an important issue, as debt collectors often handle sensitive personal information about consumers.
Debt collectors are required to comply with various pieces of consumer legislation, rules, and regulations, including:
- Australian Competition and Consumer Commission
- Australian Consumer Law
- Australian Privacy Principles
- Australian Securities and Investments Commission
- The Privacy Act
This legislation (amongst others) set out the rules for collecting, using, and disclosing a debtor's personal and contact information.
However, there have been some cases where certain debt collection agencies have improperly disclosed, and/or misused consumer personal information.
For example, a certain type of less reputable debt collection agency may share or attempt to sell the personal information of a debtor to third parties, or use it to use physical force, undue harassment, coercion, or intimidation on the debtor.
It is important for a debt collection agency to do everything possible to protect consumer privacy and ensure that the debt collectors are complying with all the relevant laws, rules, and regulations.
Consumers can also take measures to protect their own privacy and private information, such as being cautious about sharing personal information with unfamiliar people, or sharing it online.
Debt Collection Agency FAQ - International Debts
Debt collectors may be called upon to collect debts that originated outside of their home country. These are known as international debts.
Collecting international debts can be more complex than collecting domestic debts, as it involves navigating different legal systems and cultural differences.
International debts may arise in a number of different contexts, such as when a consumer travels abroad and incurs debts in a foreign country, or when a business operates internationally and extends credit to customers or clients in other countries.
Debt collectors may use a variety of methods to collect international debts, such as negotiating payment plans or settlements, initiating legal action, or working with local partners or agents in the foreign country.
It is important for debt collectors to be aware of and comply with the laws and regulations that apply to collecting international debts, as well as any cultural differences that may affect the collection process.
Consumers who are facing international debts have the same rights and protections as they do when dealing with domestic debts and should be treated with respect and fairness by collectors.
Debt Collection Agency FAQ - Professional Ethics
Professional ethics are the principles and values that guide the behaviour of professional debt collectors.
Ethical principles for debt collectors include the following (inter alia) - honesty, fairness, respect, responsibility, professionalism, confidentiality, and transparency.
Debt collection agencies are required to adhere to strict professional ethical standards and behave in a way that is consistent with the values of their profession.
Any violation of these professional ethics can have serious consequences for a debt collector, including damage to their reputation, loss of the debt collection or field agent license, the loss of clients, and potential legal action.
It is very important for debt collectors and debt collection agencies to stick to these professional ethical standards, and to behave in a manner that is entirely consistent with the values of their profession.
At Advance Debt Collection, we take our ethical obligations very seriously.
Debt Collection Agency FAQ - Credit Reporting
Debt collectors and credit reporting are closely related in Australia, as debt collectors may report unpaid debts to credit reporting agencies.
Credit reporting agencies, such as Equifax, maintain credit reports on individuals and businesses that contain information about their credit history, including their credit accounts, payment history, and any outstanding debts.
When a debt is reported to a credit reporting agency by a creditor or debt collection agency, it can have an impact on the debtor's credit score and creditworthiness.
Unpaid debts may be reflected on the debtor's credit report for up to five years, depending on the type of debt. This can make it more difficult for the debtor to obtain credit or loans in the future.
Debt Collectors and Alternative Dispute Resolution
Alternative dispute resolution (ADR) is a process that allows parties to resolve disputes without going to court.
In the debt collection industry in Australia, ADR can be used as an alternative to legal action for resolving disputes between debtors and creditors or debt collection agencies.
There are a number of different ADR options available in Australia, including negotiation, mediation, arbitration, and conciliation.
These options may be more cost-effective and less time-consuming than going to court and can help to preserve relationships between the parties.
Debt collectors may be required to participate in ADR in certain circumstances, such as when a dispute arises about the validity or amount of a debt.
ADR can be an effective way for debtors and creditors or debt collection agencies to resolve disputes and avoid the time and expense of legal action.
Debt Collection Agency FAQ - Bankruptcy
Bankruptcy is a legal process that allows individuals or businesses to seek relief from their debts when they are unable to pay them.
If a debtor declares bankruptcy, their debts may be discharged (cancelled) or restructured.
This can provide the debtor with a fresh start and a way to manage their debts more effectively. Bankruptcy usually lasts for three (3) years until discharge.
However, bankruptcy also has consequences for the debtor, such as the loss of certain assets (real and personal property) and will have a negative impact on their credit rating.
Debt collectors are required to follow certain rules when dealing with debtors who are bankrupt or who have declared bankruptcy.
Debt collection companies are prohibited from taking certain actions, such as suing the debtor or garnishing their wages, while they are bankrupt.
Debt Collection Agency FAQ
Do you have a questions about debt collection agencies? You're not alone!
This debt collection agency FAQ covers everything you need to know about dealing with debt collectors, including your rights (as a debtor or a creditor).
Get the answers you need to navigate the debt collection process with confidence.
What is a debt collection agency in Australia?
A collections agency is a company used by creditors including (but not limited to) credit card providers, banks, and other financial institutions.
A debt collector is primarily focussed on collecting unpaid debts (such as unpaid invoices) on their behalf.
A debt collection agency can also be hired by businesses to collect debts from their customers (such as unpaid invoices or refunds).
How does a debt collection agency in Australia work?
A debt collection agency begins the process of collecting debts by sending an initial of demand, or making a phone call to the debtor, informing them of the outstanding debt and requesting payment.
If the debtor fails to respond or make any payments toward the debt, the debt collection agency may take further action, such as negotiating a payment plan or settlement, or referring the debt for legal action against the debtor.
What are the laws and regulations governing debt collection agencies in Australia?
The regulations and laws governing how a debt collection agency can operate include the following:
- the Australian Consumer Law (ACL); and
- the Debt Collection Guideline (DCG).
The ACL is a national law (found in Schedule 2 of the Competition and Consumer Act 2010) that applies to all businesses and commercial ventures operating in Australia and sets out consumer protections and rights in relation to the sale of goods and the provision of services (including debt collection services).
The DCG is a set of guidelines issued by the Australian Securities and Investments Commission (ASIC) that outline the responsibilities and obligations of a debt collection agency and creditors when collecting debts.
Can a debt collection agency in Australia take legal action against me?
If a debt collection agency in Australia is unable to collect a debt through the usual methods, such as negotiating a repayment plan, or making an offer of settlement, it may take debt recovery legal action against you.
This could involve filing a claim and statement of claim in the Courts, or an application in QCAT.
The purpose of legal action is to obtain a judgment against you, which allows the creditor to garnish your wages, redirect debts, or seize your real and/or personal property to recover the debt.
How can I dispute a debt with a debt collection agency in Australia?
If you believe that a debt collection agency in Australia is attempting to collect on a debt that you genuinely do not owe to the creditor, or if you are unsure about the genuineness or validity of the alleged debt, then you can dispute the debt.
To dispute a debt that is trying to be collected by a debt collection agency in Australia, you can follow the following simple steps:
- Request validation of the debt - You have the right to request validation of the debt, which means that the debt collection agency must provide you with proof that the debt is valid and owed by you.
- Write a letter disputing the debt - You can write a letter to the debt collection agency disputing the debt and stating the reasons for your dispute. Be sure to include any supporting documentation, such as proof that you already paid the debt or that the debt is not yours.
- Contact the creditor - If you are unable to resolve the dispute with the debt collection agency, you can contact the creditor directly to try to resolve the issue.
- File a complaint - If you believe that the debt collection agency has violated your rights under the Australian Consumer Law (ACL) or the Debt Collection Guideline: For Collectors and Creditors (DCG), you can file a complaint with the Australian Securities and Investments Commission (ASIC).
Can a debt collection agency in Australia garnish my wages or seize my assets?
If a debt collection agency is unable to collect on the debt through the usual methods, the debt collection agency may take legal action against you (or refer the debt to debt recovery lawyers).
This will involve filing a claim and statement of claim in the Court with the purpose of obtaining a judgment against you.
This judgment will allow the creditor to obtain a warrant for redirection of earnings, or a warrant for seizure and sale of your real and/or personal property.
What resources are available to help me manage my debts and avoid falling into debt in Australia?
There are a number of resources available to debtors help them manage their debts more efficiently and avoid falling further into debt. These resources include (inter alia):
- Credit counselling services - Credit counselling services provide financial education and assistance with creating a budget and paying off debts.
- Financial education programs - Financial education programs are educational courses or workshops that teach consumers about financial management and decision-making.
- National Debt Helpline - Call 1800 007 007
Is it good to pay a debt collection agency?
It is generally considered good to pay a debt collection agency if you owe the debt and have the means to pay the debt. Paying a debt can help protect your credit score and avoid potential legal action.
Can you ignore collections agencies?
It is not recommended to ignore collections agencies, as this can make the situation worse and potentially lead to legal action.
It is generally better to try to negotiate a payment plan or settlement with the collection agency, or to seek help from a credit counsellor or other resource if you are unable to pay the debt.
What should you not say to a collection agency?
You should not say anything that is not true or that you cannot back up when speaking to a collection agency.
It is also not recommended to say anything that could be perceived as threatening or abusive. Instead, try to remain calm and professional, and focus on finding a solution to pay the debt or resolve the dispute.
Debt Collection Agency FAQ - 3 Most Asked Questions
Debt Collection FAQ - The three (3) Most Asked Questions to debt collectors.
Are you a creditor or debt collector in Australia thinking about using debt collectors for your business?
If so, there are various things you are required to consider when pursuing debt repayment from a debtor.
It can be challenging to keep all of this knowledge together and apply it as necessary, but it can be very important to your reputation and even legal status as a creditor or debt collector.
Debt Collection Agency FAQ - What is the Debt Collection Process?
This is a very common question by creditors, especially when they are first beginning in the field.
In order to get the best out of the debt collection process, there are several steps you should be taking with each individual debtor.
The process begins with thorough research of the debtor to find as much relevant information about them as you can get your hands on.
It is vital that you are respecting the privacy of the individual, which will be discussed later in the article.
This information should be relevant to either the location of your debtor, the debt, or both if necessary.
People have a lot going on in their lives and, sometimes to your inconvenience, debts and other financial matters can simply slip their minds.
If you have trouble reaching your debtor or cannot find their current address or other information needed for the collection, some investigation will likely be needed.
You may undergo this process through skip tracing tools. Once your debtor is located, you can then engage in the second step, contacting the debtor.
Contacting the debtor to remind them of payment or enforce payment (depending on your circumstance) may occur through a phone call, email, message, letter, or another method that works for your business.
If this attempt to contact is unsuccessful, it is wise to follow up with a second form of contact.
If the second attempt to contact is unsuccessful you may wish to follow up with forms of inquiry into the owner of their last known home or vehicle or by hiring the assistance of a private investigator, again being careful to abide by debt collection privacy laws.
After this step, if you still do not successfully contact the debtor and receive a payment for the debt owed, you may begin to engage in legal action against them.
Sending the client an official legal letter, signed by a practising solicitor may be the wake-up call needed to pay the debt. If not, it is likely time to engage in court action.
What are the Laws of Debt Collection?
As a debt collector or creditor, it is absolutely vital that you are knowledgeable about the laws of debt collection, to avoid legal action against you in the future.
If you are a creditor and hire a debt collector, ensure that they follow these laws as any illegal activities will be your responsibility, so hire carefully!
Debt collectors, once employed by a creditor, can be made responsible for the collection of any debt you can think of, but the ways in which they make said collection is restricted.
These restrictions are established by The Queensland Office of Fair Trading, which regulates the requirements a collector must abide by when collecting debts for clients.
Australian laws state, as shown on the Australian Competition and Consumer Commission (ACCC) site, that a collector must not do any of the following when pursuing a collection:
- Use physical force;
- Use any form of coercion;
- Harass or overly contact the debtor;
- Engage in any deceptive or false behaviour towards the debtor;
- Take advantage of any weaknesses or disadvantages the debtor may have. This may include a vulnerability, disability, or mental health condition a debtor may have.
Debt Collection Agency FAQ - When Can I Contact My Debtor?
You may be wondering, when am I allowed to contact my debtor when I need to discuss debt-related matters?
As a creditor, there are limitations on the reason, time, and place that you can contact your debtor for.
There are several reasons, established again on the ACCC site, that are considered reasonable causes to come in contact with your debtor.
If you are required to speak to a debtor to inform them about details regarding their account or debt, you may do so.
Another valid reason to contact a debtor is if you wish to make a demand for payment of debt.
Some other reasons that it may be necessary to speak with your debtor include:
- Informing your debtor of the consequences or penalties if they do not pay their debt in the discussed timeframe.
- To discuss a change in arrangement with the payments.
- To suggest the possibility of a payment plan with your debtor.
- To call for a review of payment plans made in the past after the agreed-upon interval period.
- To inquire about past failed attempts to contact them.
- To ask why an agreed-upon payment plan is not being adhered to.
- To find out why the debtor has changed relevant personal details about themselves without notifying you. This may include their address, name, account details, or others.
- To view or obtain an object of security interest. This may be a vehicle.
There are also restrictions surrounding the time and day you may contact a debtor during, as well as on the number of times you may utilise different forms of contact.
If you want to contact your debtor over the phone or face to face from Monday through to Friday, you must only do this from 7:30 am to 9 pm.
You can contact them at work during the same days, you must either do this during their regular working hours or, if you do not know this information, from 9 am- 5 pm.
If you need to contact your debtor face to face or over the phone on a weekend, you may do so from 9 am – 9 pm.
It is not recommended to contact a debtor at all on national public holidays.
Debt Collection Agency FAQ - Key Takeaways
Collecting debts can be difficult. With all the things you are required to balance at once, it can simply become too much, especially if you are collecting from/for multiple clients at a time.
Having an adequate understanding of the laws surrounding debt collection can be vital to the well-being of your business, so it is important that you learn it.
If you are struggling with this, you can always seek the advice of a legal professional to help you to know your position and how you can go about the collection.
Advance debt collection is an Australia-wide commercial debt collection agency and credit and accounts receivable management. We can recovery your debts, conduct skip tracing, and manage your accounts receivable. We collect your debts for commission only. This means no collection, no commission. We are professional debt collectors with combined 20 years of experience to help you collect your debts. We are partnered with expert litigation lawyers with years of experience in debt recovery, enforcement, and insolvency. Under the Agents Financial Administration Act 2014 Advance Debt Collection Pty Ltd hold authority number 4583821 to act as a debt collector. ADC Advance Debt Collection® is a registered trademark.