At LCollect we believe that knowledge is power. Every month our debt collection blog gives you practical tips, stories and news from around Australia and the world.
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.
A phone book publisher, Local Blue Pages, has been fined $40,000 by the Magistrates' Court for coercive debt collection.
The phone book, which is primarily delivered in the Melbourne metropolitan area, contains advertisements from small businesses however following an investigation by Consumer Affairs Victoria it was found that Local Blue Pages had harassed 4 advertisers between 2014 and 2016 using illegal debt collection tactics.
These tactics included:
It is common in the debt collection industry a debtor to elect to authorise a 3rd party to act on their behalf.
Regulatory Guide RG96 Debt Collection Guidelines give the right to the debtor to authorise a 3rd party to represent them or advocate on their behalf about the debt.
What happens however when this 3rd party does not consent, won't respond or does not have instructions from the debtor?
RG96 is very specific about when you are entitled to contact a debtor which we have supplied as an extract below:
(d) You are entitled to contact a debtor directly if:
- The debtor specifically requests direct communication with you
- The representative does not consent to represent the debtor in relation to the debt
- The representative advises you that they do not have instructions to represent the debtor in relation to the debt
- The representative does not respond to your communications within a reasonable time (normally seven days) and you advise the representative in writing after the reasonable time has passed that if they do not respond within the next seven days, you will make direct contact with the debtor
- You advised the debtor that you require a written authority which states that you are only to communicate through the debtor’s representative, and the debtor or representative fails to provide you with that written authority within a reasonable time (normally seven days). Note that this does not apply where the debtor’s representative is a solicitor. When an authorised representative does not agree to have written correspondence redirected to the representative, such correspondence should continue to be sent directly to the debtor.
Other instances where contact can be made with a debtor directly where they have previously authorised a 3rd party include:
- The representative may be charging the debtor a fee for services that can be readily accessed free of charge
- The representative may be receiving payment from the debtor for the negotiation of a debt settlement
- You reasonably believe that the representative is not informing the debtor of all available options, offers of settlement, offers of hardship assistance or other creditor proposals
- You reasonably believe that the representative is engaging in a deceptive or misleading manner in engagement with either or both the creditor or the debtor
- You reasonably believe that the debtor has not been informed of the potential risks and
consequences of a course of action the representative is pursuing
- You reasonably believe that the representative is acting against the debtor’s best interests.
It is our recommendation that where you have elected to discontinue contact with an authorised 3rd party that not only is your intention confirmed to the 3rd party in writing, and a minimum 7 days allowed for a response, that when contact is made with the debtor that you clearly indicate as to why you are no longer communicating with their representative and ensure that any correspondence is documented for future reference.
Note: Please note that this article does not constitute legal advice. If in doubt you should seek your own proper, independent legal advice.
It has been some time since we looked at the impact of the Statute of Limitations in debt collection so we thought that an update might be worthwhile as a refresher not only for our long-term subscribers but also those that have recently subscribed to this blog and our newsletter.
What Are Statute Barred Debts?
Statute Barred debts are debts to which the appropriate limitation period has expired for the debt to be collected. Across each State and Territory of Australia the limitation period varies from 3 years to 15 years.
The table below summarises the limitation period for each State and Territory:
It should be noted that in the table above that the limitation periods stated only apply to unsecured personal loans and credit cards (overdrafts, line of credits, etc). These are typically referred to as "simple contracts" and Court Judgments.
When Does the Limitation Period Start?
The limitation period starts from what is referred to as a "right of action". While not particularly straightforward a right of action can be interpreted as when a debt becomes due, either because a contractual repayment is required, or because an instalment that fell due is defaulted on as set out in the contract.
Can The Limitation Period Be Extended?
The limitation period can be extended when payment is received or the customer acknowledges the debt. There are other circumstances that may extend the limitation period, specifically relating to a Judgment Debt, however you should seek your own independent legal advice concerning this.
How Is A Debt Acknowledged?
The legislation surrounding the limitation period is very specific in relation to what must occur for the debt to be acknowledged. The acknowledgement must:
A Sydney based SEO ("Search Engine Optimisation") company allegedly contacting 3rd parties in relation to an outstanding debt is currently being investigated by NSW Fair Trading over potential breaches of Australian Consumer Law.
The company, Search Results Specialists, appears to undertake their own debt collection activities and after having invoices go unpaid by La Mona Beauty it is alleged that they contacted 3rd parties, including the owners daughter's boyfriends employer, the owners son's boss as well as the Local Council and suppliers to the debtor.
Search Result Specialists claimed that La Mona Beauty owed $1,400 for SEO work performed however the owner, Nidhal Robb, denied utilising their services and asked for evidence which was not forthcoming.
It is being reported that the matter has now been settled by the parties, NSW Fair Trading have indicated that since 2014, 64 complaints have been received about Search Results Specialists including 12 in this year alone.
While this is certainly not an isolated incident for Search Results Specialists it should serve as a reminder to anyone undertaking the collection of debts that you must comply with not only Australian Consumer Law but also the ACCC / ASIC Debt Collection Guidelines.
The February 2016 release of CIO News had an interesting case study published.
It was noted in the article that the service of legal documents are deemed to be enforcement of a debt. This is particularly relevant if a complaint has been lodged with the Ombudsman and a legal document, such as a Statement of Claim, are with an agent for service.
In the case study the following timeline was utilised:
The Financial Services Providers ("FSP") Commercial Agent who was instructed to serve the Claim waited until 24 September 2015 to serve the claim knowing the customer would be at Court in an unrelated matter.
It is unclear whether the FSP instructed the Commercial Agent to hold service pending the outcome of the CIO Dispute which was a necessary step the FSP needed to perform.
The outcome of this for the FSP was an agreement to allow the customer 28 days from the date of the CIO review to file a Defence.
Source: FSP News
Three consumers had brought an action against three debt collection agencies on the basis of violating the Fair Debt Collection Practices Act ("FDCPA") on the basis of misleading or deceptive conduct on the basis of threatening action they do not intend to take.
In these cases:
The Court of Appeal dismissed the proceedings and agreed with the Federal Court, noting that it is not always economic or desirable to go to a trial and a collection agency is entitled to change its strategy at any time in the process.
Court action has been commenced against ACM Group Ltd by the Australian Competition and Consumer Commission ("ACCC"). The ACCC allege that ACM engaged in conduct that breached Australian Consumer Law and / or the Australian Securities and Investments Commission Act.
The breaches include:
With the changes to the letter delivery service of Australia Post, changes were required when issuing notices under various statutes (for example Consumer Credit Notices).
The delivery time on regular mail will now be longer by an extra 1-2 business days. In the context of the time of receipt of a letter, should these days fall over the weekend coupled with a public holiday, this may add an 5 additional days for a letter to reach its destination.
You can find out more about the changes made by Australia Post here.
We note that many of our clients have already changed there notice templates providing for additional days, however some have not.
With respect to Statements of Claim in New South Wales being served by the Local Court using the postal service method, we are allowing an extra day for service, so 5 working days (previously 4 days) so as to avoid any doubt or problem that may be raised.