Are you a creditor in Australia? If so, it is important that you are aware of your legal obligations as an individual in your position.
Debt collection guidelines can be quite difficult to read and, more importantly, understand, but it is vitally important you are knowledgeable about them! This can help you to avoid entering into an interaction with a debtor poorly, or even keep you out of court!
Debt collection guidelines: for collectors and creditors is an Australian guide for creditors, created by the Australian Consumer & Consumer Commission, that helps you to stay on the right side of the law when recovering debts.
This article will outline the basics of the debt collection guidelines and help you to understand what you may and may not do as a creditor in Australia.
Debt Collection Guidelines – What Debt Collectors Cannot Do
As established by the debt collection guidelines, there is a list of behaviours debt collectors are not allowed to exhibit when attempting to recover debts. These include:
- Threatening to take legal action that they either do not intend to follow through with or are not permitted to take;
- Spreading, or causing the spread of, the personal or private information of the debtor;
- Contacting the debtor unreasonably frequently, otherwise harassing the debtor;
- Faking their identity;
- Attempting to, regardless of succession, embarrass, exhaust, intimidate, frighten, or demoralise the debtor;
- Attending the home or workplace of the debtor without their knowledge or permission, or in the case of permission, not leaving said establishment when asked.
Contacting a Debtor
You may be wondering if there are any regulations on contacting your debtor. Well, the answer is yes.
When contacting a debtor in the pursuit of debt recovery there are several debt collection guidelines , set out by the debt collection guideline for creditors and collectors, that ensure you are remaining lawful in your attempts to communicate with them.
You must, of course, initially ensure that the individual you are contacting is the same person that owes you the debts you are recovering.
This is to avoid relaying confidential information regarding the debts to people that it does not concern, a violation of the privacy of your debtor.
There are a number of reasons that you may contact your debtor appropriately, including:
- To demand a payment;
- Explain any consequences you may have in place if the payment is not completed in time/at all;
- -Offer a payment plan;
- Offer a negotiation of the debts;
- Discover if a payment has failed;
- Discover whether the debtor’s personal information has changed;
- Discover why previous attempts of contact have failed.
As a creditor, you are encouraged by the debt collection guidelines to be flexible and open to negotiation regarding the debt, taking into account financial struggles or other difficulties in the lives of the debtor.
Debt Collection Guidelines – Privacy of a Debtor
As a creditor or collector, the debt collection guidelines make it abundantly clear that the privacy of your debtor should always be a priority of yours.
As aforementioned, you should always ensure prior to the contact of a debtor that you are contacting the correct individual to avoid disclosing any information regarding the debtor or their debts to you.
Sharing any of the private information you are entitled to, or simply have in your possession, of your debtor is recognised as a threat to their personal safety or wellbeing of them.
It is unlawful for you to collect specific sensitive information of your debtor unless deemed necessary under the function or productivity of your establishment or business.
These particular regulations are set out by the Australian Privacy Principles. Said sensitive information must further not be collected without the consent of your debtor.
When Should I Outsource?
Outsourcing is defined as the process of passing specific tasks of your business onto a third party, generally, one that specialises in the said task.
In debt collection, this may mean the hiring of a debt collection agency to pursue debt recovery from a debtor.
Hiring a debt collection agency may be necessary when you have a stubborn client or simply when all else fails as a last resort.
The debt collection guidelines state that there are two methods a creditor may use to collect debts; hiring a third party or taking action through the court system.
You should make sure you are thorough with your background search of potential agencies if you wish to take this route, however. As a creditor, you are personally responsible for the actions taken by the debt collection agency you choose, so ensure you choose carefully.
Debt collectors act unlawfully if they:
- Use physical force;
- Harass the debtor in form;
- Threaten the debtor in any form;
- Take advantage of the vulnerabilities of the debtor, such as old age or disability;
- Use misleading or deceptive conduct of the debtor.
Legal Action Against a Debtor
Provided a court order is not served on your debtor, you will only have a specific period of time to take action against them. In Queensland, you are permitted 6 years from the last payment received.
You have a legal entitlement to pursue action through the courts, however, once the action is taken you must follow the consumer protection laws.
When taking legal action against a debtor, you are required by law to avoid misrepresentation of your intended action or the court process. As stated directly in the debt collection guidelines, for example, do not:
- misrepresent the nature or purpose of correspondence. Ensure the layout, wording, and design of documents (for example, letters of demand) are not likely to create the impression in the mind of the debtor or their representative that they are court process or other court documents, or that they were sent from a solicitor’s office when this was not the case;
- suggest that telephone calls are recorded ‘for training purposes (and, by implication, only for such purposes) when those calls may also be used as evidence;
- misrepresent that failure to pay a debt (where no fraud is involved) is a criminal or police matter, or is likely to be referred to the police;
- misrepresent that you are a police officer, court official, or have some official capacity that you do not have to claim or enforce payment of a debt;
- state or imply that unsecured basic household items can be seized if the debtor is made bankrupt;
- state or imply that legal action has already been taken, or judgment entered, concerning the debt when this is not the case.”
Debt Collection Guidelines – Key Takeaways
Life as a creditor can be difficult. Always following up on debtors and possibly even taking legal or other action against them.
You are probably trying to avoid breaking the law in the process.
This is why it is so important to be aware of your rights and, more importantly, responsibilities as a creditor.
Be sure to consider the details of your matter before practically taking any action with a client and refresh yourself on the laws and debt collection guidelines often.
Who knows, it may save you a court matter in the long run!