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.
There has been some anxious times recently for body corporates who have been eagerly awaiting the decision in the Queensland Court of Appeal in Body Corporate for Mount Saint John Industrial Park Community Title Scheme 18632 v Superior Stairs & Joinery Pty Ltd  QCA 173.
In the District Court the Defendant, Superior Stairs & Joinery Pty Ltd (STJ) argued that the action by the Plaintiff, Body Corporate for Mount Saint John Industrial Park Community Title Scheme 18632 (Body Corporate), should be struck out after action was taken for the recovery of unpaid levies, recovery costs and penalty sums on the basis that the proceedings were commenced outside of the limitation period. STJ arguies that the limitation period for bringing body corporate debt recovery action was contained in Section 145 of the Body Corporate and Community Management (Standard Module) Regulation 2008 (QLD) -
Part 4 Payment and Enforcement of Body Corporate Debts
s145 Payment and Recoery of Body Corporate Debts
(1) If a contribution or contribution instalment is not paid by the date for payment, the body corporate may recover each of the following amounts as a debt -
(a): the amount of the contribution or instalment;
(b) any penalty for not paying the contribution or instalment;
(c) any costs (recovery costs) reasonably incurred by the body corporate in recovering the amount.
(2) If the amount of a contribution or contribution instalment has been outstanding for 2 years, the body corporate must, within 2 months from the end of the 2-year period, start proceedings to recover the amount.
STJ successfully argued in the District Court that the time limit for recovery of a debt by the body corporate was 2 years and 2 months pursuant to s145(2) however the Body Corporate submitted at the time that the time limit was 6 years from the date the levy became due and payable pursuant to Section 10 of the Limitations of Actions Act 1974 (QLD).
The District Court agreed with STJ at the time however on appeal, the Court of Appeal, overturned the District Courts decision. In the decision Justice McMurdo, Justice Mullins and Justice Bond stated that the issue raised on appeal was not that of conflicting limitation periods but whether or not s145 prescribes a limitation period. The Justices concluded that s145 is to compel a body corporate to commence proceedings but cannot be interpreted as a limitation period and therefore s10 of the Limitiation of Actions Act is the governing legislation (ie 6 years from the date the contribution becomes outstanding).
In a recent Victorian Supreme Court matter, Financial Ombudsman Services Limited v Pioneer Credit Acquisition Services Pty Ltd  VSC 172, an interesting outcome occurred in relation to collection action being undertaken on debts approaching the statute of limitations.
Pioneer are a debt collection agency who purchase debts and collect debts for clients. They purchased a debt ledger where the debts originated in the UK. The majority of the debts were from Barclays Bank. The case concerned debtors who moved to Australia. The debts acquired were subject to the Consumer Credit Act 1974 (UK).
In July 2009 a complaint was made to The Financial Ombudsman Service (FOS) disputing the amount of a debt, and that a default listing had been made in these circumstances. In September 2009 Pioneer advised FOS the matter would be statute barred in November 2009 and sough consent to initiate legal action. FOS consented to the commencement of proceedings in Western Australia on
the provision that the proceedings not be served on the defendant until
the matter had been determined, and if the determination was unfavourable the proceedings be discontinued.
On another debt, a debtor made a complaint to FOS on 4 December 2009. Pioneer contact FOS to seek consent to commence legal proceedings because the debt would otherwise become statute barred on 12 January 2010. FOS consented to the commencement of proceedings in Western Australia on the provision that the proceedings not be served on the defendant until the matter had been determined. FOS subsequently found that once proceedings were commenced in Western Australia, unless a debtor lodged a defence, an automatic listing would be recorded against the debtor. Upon learning this, FOS withdrew its consent to commence legal proceedings. Despite this Pioneer commenced proceedings on 7 January 2010.
FOS made a determination that the debts were unenforceable in Australia.
The dispute between Pioneer and FOS was a contractual dispute. Pioneer argued amongst other things;
The Judge in the Victorian Supreme court found;
Amongst other things, Pioneer was ordered to pay approximately $110,000 in costs to FOS. The membership contract between FOS and Pioneer was held to be valid and binding on Pioneer.
Effectively the decision by FOS meant that one of the debts became statute barred and were not collectable and that this was a reasonable outcome, that is it was more reasonable for a debt to become statute barred for the debtor than for the creditor to completely lose its right to enforce a debt.
If we can answer any questions, or if you feel you do not owe this amount, please call us toll free at 800-984-9115 or write us at the above address. This is an attempt to collect a debt. Any information obtained will be used for that purpose. (NOTICE: SEE REVERSE SIDE FOR IMPORTANT INFORMATION.)
On the back of the collection letter it stated:
This is an attempt to collect a debt from a debt collection agency. Any information obtained will be used for that purpose.
Pursuant to Sec. 809 of the Fair Debt Collection Practices Act, unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within 30 days from receiving this notice that you dispute the validity of this debt or any portion thereof, this office will: obtain verification of the debt or obtain a copy of a judgement [sic] and mail you a copy of such judgement [sic] or verification. If you request this office in writing within 30 days after receiving this notice, this office will provide you with the name and address of the original creditor, if different from the current creditor.
The debtors contention was that a consumer could be confused by the second paragraph where it refers to "please call", where on the back of the letter, all disputes must be "in writing".
The previous court had ruled that the "please call" language would not confuse "the least sophisticated debtor".
The appeal court however ruled that it would be confusing to the "least sophisticated debtor".
What can we take from this ruling? Always ensure your message / communication is consistent, and consistently applied through your debt collection process.
In the US, the Federal Trade Commission agreed to a $2.5m US penalty settlement with a debt collection company, Asset Acceptance. This represents the second largest penalty against a Debt Collector in the US.
Asset Acceptance was charged with a number of complaints including;
- failing to tell consumers they could no longer be sued because of the debts age
- reporting inaccurate information about debtors to credit reporting agencies
- failing to conduct a reasonable investigation by one of the credit credit agencies that a debt was being disputed
- continued to try and collect debts that debtors disputed that were not investigated to determine if the debt was valid or not
- used illegal collection practices
Asset Acceptance in the settlement noted that it did not admit to any of the allegations
The debt collection industry in the US has seen complaints rise and the settlement is part of a strategy by the FTC to patrol the industry. Complaints in the collections industry in 2010 jumped by 17%. The collections industry makes up 11% of all complaints received by the FTC (up from 9%).