Released every month our debt collection blog contains news, stories and tips to keep you informed.
Newly appointed Chief Ombudsman, David Locke, has recently announced in an article in the Financial Review that Financial Service Providers (FSPs) that fail to respond quickly to matters brought to the attention of the Australian Financial Complaints Authority (AFCA) may face bigger compensation bills.
Since its inception in November 2018 AFCA claim to have received 11,500 complaints of which 4,000 have been about FSPs. By direct comparison the Financial Ombudsman Service, at its peak, received 2,100 complaints per month.
Mr Locke indicated that responsible lending and misleading sales were among the issues most frequently complained about by consumers and said in a statement, "The volumes of matters coming to us are very high. A lot of people have been treated very poorly by financial institutions over a number of years. The royal commission has shone a bright and forensic light on some issues but most people still feel they haven't been heard or had their matters addressed."
While Mr Locke was unable to provide an actual dollar figure for compensation ordered to date he did indicate that the AFCA cost model is structured so FSPs pay more the longer a dispute goes on so there is an incentive to resolve disputes as quickly as possible.
Of the 11,500 complaints since AFCA came into power 32% of cases have been resolved.
You may recall in our August 2018 edition of Debt Collection News that we reported that the Federal Court found against a debt collection company acting for Telstra after proceedings were commenced by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities & Investments Commission (ASIC).
It has now been revealed by Yahoo! Finance that the Federal Court has ordered the debt collection agency involved to pay $750,000 in penalties for intimidation and harassment of the 2 customers who collectively owed $8,920.
The debt collection agency involved in the proceedings was ruled last year to have violated Australian Consumer Law after the ACCC commenced legal action in June 2016 where it was alleged that the agency had contacted a stroke victim on more than 40 occasions demanding payment including 20 demands made by letter despite the customer indicating to the agency that he had difficulty in speaking and could only utter single words like "stroke", "no" and "speech" in an attempt to indicate that he was disabled and unable to communicate.
ACCC Commissioner, Sarah Court, said in a statement, ".... continued harassment and intimidation of a care facility resident who had difficulty speaking after suffering multiple strokes is one of the worst cases of unconscionable conduct we have seen in the debt collection sector .... conduct towards another consumer who was in difficult financial circumstances, which included giving false information and making empty threats of court action, was also particularly egregious."
Commissioner Court went on to say, "Unconscionable conduct such as harassment, intimidation and coercion of consumers is unacceptable to not only the ACCC and the court, but the wider community."
A spokeperson for Telstra distanced the company from the proceedings stating, “collection activity is being conducted on behalf of the new owner, not on Telstra’s behalf” and that the telco sells debt to a third party only as a last resort."
LCollect hold and maintains Professional Indemnity and Public Liability insurances and are licensed in accordance with the Commercial Agents and Private Inquiry Agents Act 2004.
Issued by WHITE Insurance Brokers, copies of our policies can be downloaded for compliance purposes:
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The NSW State Government has recently announced a new free online legal service to assist people who may be experiencing mortgage stress.
The LawAccess NSW website now provides 2 interactive guided pathways to match people with the information they may need to assist them in resolving issues surrounding mortgage stress or unpaid council rates with another 4 pathways on other topics to come online later this year.
Attorney General Mark Speakman said, "This service is arriving at a crucial time for families facing mortgage stress. The online pathways are convenient and easy to use, with users only needing to answer a few simple questions to get reliable legal information and practical solutions tailored to address their situation. For example, the mortgage stress pathways provide information on budgeting, seeking a ‘hardship variation’ to a loan and tips on avoiding ‘quick fix’ pitfalls that could ultimately cause greater financial pain."
The pathways are a new online resource which makes up part of the NSW Government's $24 million Civil Justice Action Plan which harnesses technology and innovation to make it faster and easier for people to navigate the Court system and resolve their legal issues. Other key aspects of the plan include:
- creating a $1 million Access to Justice Innovation Fund to encourage legal professionals, digital experts and community groups to develop ideas to improve the way legal problems are solved;
- allocating almost $20 million in new funds for community legal centres over the next 4 years;
- expanding the online Court services to allow more people to finalise their case from the convenience of their own PC;
- increasing the jurisdiction of the Local Court's Small Claims Division to hear disputes up to $20,000 (the current limit being $10,000); and
- introducing online guidelines to encourage local and State Government to resolve unpaid debts early including negotiating time to pay arrangements.
Learn more via the Guided Pathways site at LawAccess NSW.
Recent changes in NSW have extended the amount of to 7 working days for documents served by regular post (an increase from 4 working days). A working day is deemed to be a day that is not a weekend or a public holiday.
This change effects documents particular to NSW. It does not change Consumer Credit Notices (such as s88 default notices).
For example, some of the notices impacted include;
This article is not intended to be and does not constitute legal advice.
A school district has allegedly hired a debt collection agency to recover lunch debts owed by parents.
In an article in Turnto10, it is being claimed that the Cranston Public Schools District located in Rhode Island, New England, are owed US$45,859 for unpaid lunches. It is being reported that parents have been notified that from January 2019 that debts owed on school lunches would be referred to a debt collection agency where the amount owed exceeded US$20.
School Chief Operating Officer, Raymond Votto, said in a statement to Turnto10, "In an effort to reduce our unpaid balance, the District has retained the services of a collection agency. The company is Transworld Systems and they will begin their collection efforts effective January 2, 2019". Mr Votto went on to claim that in the last 2 financial years the school district had lost US$9,508 from lunch debt. The move has been criticised by some and the impact this may have on struggling families where 43% of students are eligble for free or reduced lunches.
The Cranston Public Schools District isn't the 1st of its kind to refer these types of debts to debt collectors. In 2011 in Davidson County, North Carolina, policy dictated that lunch debts above US$37.50 be sent to collections while in 2012 an Ohio District sent US$900,000 in lunch debt to be recovered.
Lunches in the Cranston Public Schools District average US$2.50 per day for elementary school students and US$3.50 per day for middle and high school students.
The Australian Securities & Investments Commission (ASIC), in conjunction with Nature Research, has recently compiled a report "The Consumer Journey Through the Internal Dispute Resolution Process of Financial Service Providers" which has looked at the consumer experience of the Internal Dispute Resolution (IDR) process.
The research found that:
In our August 2018 edition of Debt Collection News we reported that ASIC were recommending reform to the "buy now, pay later" providers such as AfterPay and zipPay.
Following a report from the Australian Securities and Investments Commission (ASIC) it is being reported by Financial Review that the National Credit Code would not extend to the buy now, pay later sector however ASIC are indicating that there will still be close monitoring of those involved in providing the service to consumers.
The report from ASIC identified 3 key areas of focus:
- ASIC states that it will take regulatory action to address misconduct and monitor industry and risks to consumers;
- ASIC is "considering their legal position" of scenarios where a merchant inflates the cost of the underlying goods if a consumer uses a buy now pay later arrangement.
- ASIC is also 'monitoring' the issue of consumers becoming increasingly indebted due to the ability to access an alternate providers where they have missed payments. According to ASIC, each provider reviewed takes some steps to refuse some credit applications eg if a consumer misses a scheduled repayment, five of the six providers suspend that consumer’s ability to make additional purchases until they have remedied the missed payment. However, only one out of six providers in the review examined the income and existing debts held by consumers before providing their services. ASIC also received reports of instances where consumers were allowed to the service despite having limited or no income and substantial existing debt; and
- ASIC states that it expects providers to ensure that:
(a) consumers adequately understand the terms of their arrangement;
(b) a complaints process is visible and accessible for consumers;
(c) consumers understand that they can request financial hardship assistance from their provider; and
(d) merchants act consistently with guidelines supplied by the provider which limit how these arrangements may be promoted and provided to consumers. ASIC writes that 'while we identified instances where providers could have done more, each provider demonstrated a readiness to work with ASIC by improving their practices in response to our recommendations' and that some have already implemented 'several improvements'.
A copy of the report released by ASIC can be read online at Report 600: Review of Buy Now Pay Later Arrangements November 2018.
Debt collectors in Queensland appear to be confused about a recent communication forwarded to Magistrates' Court Registries regarding the legality of the filing of documents according to a recent article in the Agent.
It is alleged that a recent communique was sent to the Registries reminding them that those licensed under the Debt Collectors (Field Agents and Collection Agents) Act 2014 are ineligible in which to be signing and appearing for a Party (the Plaintiff) when the Party or their Solicitor should be acting. The communique allegedly cited Regulation 19 of the Uniform Civil Procedure Rules 1999 and -
19 Originating Process Must Be Signed
(1) The plaintiff or applicant, or the person's solicitor, must sign the originating process
(2) This rule applies subject to rule 975A(1)
The confusion apparently stems from the Magistrates' Court historically accepting an originating process (Statement of Claim) from debt collectors who claim that the Court refusing to accept documents is contrary to the Rules. Regulation 31 of the Uniform Civil Procedure Rules 1999 states:
31 Applications in a Proceeding
(1) A person making an application in a proceeding, or the person’s solicitor, must sign the application and file it.
(2) The application must be in the approved form.
(3) The application must name as respondent any party whose interests may be affected by the granting of the relief sought.
(4) If an application is made by a person who is not a party to the proceedings, the application must have on it the information required under rule 17 to be on an originating process unless the information has already been provided on a document filed in the proceeding.
Debt collectors are arguing that the Act itself does not provide a definition of a person and it would be fair and reasonable to assume that a debt collector acting for the Plaintiff becomes the Applicant on behalf of the Plaintiff.
It has been noted that Registry staff at some Courts have been attempting to assist debt collectors with reports of having the Plaintiff sign the enforcement applications or providing the debt collector with a power of authority to to all things necessary in which to commence the proceedings.
While there does not appears to be a resolution in sight there have been requests for the Queensland Attorney-General and Minister for Justice, the Honourable Yvette D'Ath to intervene.
Requests to Registries of the Magistrates' Court for copies of the communique and / or confirmation of who released the communique have allegedly not been responded to.
Please note that LCollect does not undertake legal proceedings. LCollect instruct and use the law firm Collection Law Partners for files requiring legal proceedings.
The warning comes following a complaint by a consumer that if she wanted to dispute a debt that she should raise the dispute with them but pay the debt to them in the meantime.
A spokeperson for the Commerce Commission said in a statement that the debt collection agency was incorrect in this advice as the debt collection agency had in fact purchased the debt and that the dispute should be handled by them. The Commission went on to say that it has also warned the debt collection agency to take care in the future to avoid making statements to debtors which may give the impression that Court action was inevitable if the debtor did not make immediate payment.
Commissioner, Anna Rawlings, said, "While debt collectors often need to discuss the nature of a debt and the consequences of non-payment with a debtor, they must not use misleading techniques to pressure debtors into paying or to deter them from pursuing genuine disputes. This includes saying that a debtor cannot dispute a debt, telling them that court action will commence within a certain timeframe when it may not or giving the impression that certain outcomes are inevitable if they are not."
While there may be differences in the legislation surrounding debt collection practices in New Zealand and Australia this article should serve as a timely reminder of your obligations under the Debt Collection Guidelines: for Collectors and Creditors with a specific focus on s13 of the Guidelines regarding disputed liability and s19 of the Guidelines regarding Representations about the consequences of non-payment.