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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.

Federal Court Finds Against Debt Collection Agency

Thursday, August 30, 2018 - Posted by Michael McCulloch

A debt collection agency who act for Telstra has lost their case in the Federal Court following proceedings being commenced by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC).

The proceedings, which commenced in June 2016, highlighted the pressure some agencies apply to collect payment including engaging in misleading, deceptive and unconscionable conduct in it's dealings with 2 particular customers.

The first customer, CT*, who was living in a care facility on a disability support pension, after having suffered 3 strokes, received in excess of 60 demands for payment for a debt of $5,770. The Court found that the agency knew of CT's condition, which left him with the inability to care for himself or readily speak, however called the care facility approximately 40 times and sent approximately 20 demand letters seeking payment. Several times CT was threatended with legal action despite the agency not having any plans to follow through with the threat.

In the other matter a single Victorian mother of three, who worked part time and received a Centrelink payment, was demanded to pay $3,150. It was alleged that the woman was told that legal proceedings would be commenced against her and that a payment default would be recorded. The woman in question promised a payment of 50% of the debt in an attempt to avoid legal proceedings, despite this payment leaving her unable to pay rent and meet her other day-to-day expenses.

The Judgment, which you can read online, also criticises the capitalised use of words in demand letters and the use of “the words 'could' and 'may' would reasonably be read in the light of the prominent heading to the pro forma letter, the terms of which strongly suggest that ACM intended shortly to commence legal proceedings .....".

In a statement to the media the ACCC said that they will be seeking Orders preventing agencies engaging in misleading, deceptive and unconscionable conduct and will be seeking for large fines to be imposed.

Source: itnews - July 2018

* Name noted as per the original Judgment


Victoria Plans Crackdown on Debt Collection Industry

Monday, July 30, 2018 - Posted by Michael McCulloch

The Labor party in Victoria has planned a crackdown on debt collection in Victoria if re-elected at the November State election.

news.com.au and radio 3AW 693 are reporting that organised crime groups will be the focus of a planned State Government crackdown on the debt collection industry with Police Minister, Lisa Neville, announcing earlier this month an overhaul of the regulations. In a statement to the media she said, "We'll clean up this industry, like we did with scrap metal - to tackle organised crime and crack down on rogue operators."

The Labor Government, if re-elected, would like to establish a dedicated commission and harsher penalties for those involved in unlicensed debt debt collection in Victoria and would work more closely with the police, Consumer Affairs Victoria and industry leaders to clean-up the industry.

Chief Executive of the Australian Collectors and Debt Buyers, Alan Harriers, said in response, "If they are that [sic] then it's up to Fair Trading to stop them as being illegal persons doing debt collection. I am unaware of any prosecutions against people in this regard. If they were actual proper debt buyers, they would hold an Australian credit licence that is issued by ASIC. It's a very highly regulated industry."

In Victoria there is not a legal requirement in which to hold a debt collection licence.


Attorney General Reviews Consumer Credit Reporting and Hardship

Thursday, June 28, 2018 - Posted by Michael McCulloch

The Attorney Generals Department has recently released a discussion paper regarding the relationship between consumer credit reporting and hardship.

The purpose of the paper is to examine whether hardship is currently treated adequately under the credit reporting provisions in Part IIIA of the Privacy Act, whether there are opportunities for reform and if so what reforms are appropriate.

The Attorney Generals Department did stress that the paper is not a general review of repayment history information in the consumer credit reporting system.

Source: Attorney General's Department - April 2018


Cash Converters Fined $650K For Breaching Guidelines

Thursday, June 28, 2018 - Posted by Michael McCulloch

Cash Converters has again found itself in the spotlight for all the wrong reasons with ASIC finding that the company failed to meet regulatory guidelines and breaching the ASIC and ACCC Debt Collection Guidelines.

An ASIC investigation found that the pay day lender routinely breached the frequency of contact guidelines of 3 times per week or less than 10 times a month -

5. Frequency of Contact
(c) Unnecessary or unduly frequent contacts may amount to undue harassment of a debtor. We recommend that you do not contact a debtor more than three times per week, or 10 times per month at most (when contact is actually made, as distinct from attempted contact) and only when it is necessary to do so. This recommendation does not apply to face-to-face contact which is specifically addressed below. 

The investigation also uncovered that a related company, Safrock Finance Corporation (QLD), was also found to have provided incorrect information to a credit reporting agency. The error resulted in 38,500 customer being reported  inaccurate amount owing over a 1 month period. According to ASIC the financier has since worked with Equifax to ensure all incorrect credit listings have been removed.

ASIC has since imposed licence conditions on Cash Converters which includes outsourcing all of their debt recovery to a 3rd party collection agency and must seek consent from ASIC prior to bringing these activities back in-house.

In retribution this time around, Cash Converters has paid $650,000 in community benefits payments to the National Debt Helpline for breaching the Guidelines.

Peter Kell, ASIC Deputy chair, said in a statement to the media, "Consumers expect to be treated fairly and in a manner that complies with consumer protection laws. ASIC expects all financial service providers to have appropriate systems and controls in place to ensure that debt collection practices are consistent with the guidelines. It is also critical that licensees ensure that credit information provided to credit bureaus is accurate."

This is not the first time that Cash Converters has been investigated by ASIC. You may recall that in our May 2017 blog post that Cash Converters were fined and paid $1.35 million in penalties for breaching responsible lending conduct provisions and refunded consumers $10.8 million in fees through a consumer remediation program.

You can download a copy of the ASIC and ACCC Debt Collection Guidelines from their website.

Source: TheAdvisor - May 2018


Enforcement of Judgment While EDR Investigates

Thursday, March 29, 2018 - Posted by Michael McCulloch

As you may be aware once a debt has been referred to External Dispute Resolution ("EDR") all collection action should cease pending the complaint or dispute being resolved. What happens though when you have a Judgment and a dispute or complaint is lodged?

Both of the current EDRs in the Financial Ombudsman Service ("FOS") and the Credit and Investments Ombudsman ("COSL") have Terms of Service which clarify their position when it comes to a Judgment with both indicating that where Judgment has been entered they have no jurisdiction but how does this work in a practical sense?

In our quest for answers we reviewed some of the outcomes where Judgment was entered and a complaint or dispute was lodged with an EDR. In our search we came across a Review by COSL in August 2016. The original complaint related to:

  • a Security Certificate breach that appeared on the FSPs website on or around June 2012; and
  • a Default Judgment obtained by the FSP from the Local Court of NSW on or around October 2015 to recover $47,454.49 from the consumer.
The outcome of the review has been transcribed below:

The claim that the FSP committed a breach of the consumer’s privacy by not remedying the security certificate breach
The claim that the consumer’s privacy was breached as the FSP did not remedy the security certificate breach. We would not be the appropriate forum to consider complaints about security certificates. Based on the available information, we consider it more appropriate that the consumer
direct this claim with the Office of the Australian Information Commissioner. The OAIC can investigate privacy complaints covered by the Privacy Act 1988 (CTH) and also complaints relating to handling of the consumer’s personal information by the FSP.


The consumer’s claim that the Statement of Claim was issued to the wrong address despite the consumer updating the consumer’s new address on xx July 2015
The FSP has provided us a copy of the judgment by the Local Court of NSW against the consumer dated xx October 2015 and a copy of the notice dismissing the consumer’s motion to set aside the default judgment dated xx May 2016. A court has ordered that the consumer pay the judgment debt. We cannot deal with a complaint if the subject matter of the complaint has been determined by the court. This is because we are not able to make a decision that would be seen to conflict with a decision of the court. Furthermore, only a court is able to set aside a court’s judgment. If the consumer wishes to set aside the default judgment, the consumer’s claim would be better raised with the Local Court of NSW.

The consumer’s claim that the FSP attended the hearing on xx May 2016 despite being aware of the complaint being open with CIO
We received the consumer’s complaint against the FSP on xx May 2016. When we receive a complaint, the financial services provider is required to cease enforcement action for as long as we deal with the complaint. On or around the same time the consumer lodged the complaint with us, the consumer approached the Local Court of NSW to set aside the default judgment obtained by The FSP. Both the parties attended the hearing to set aside the default judgment on xx May 2016. The court dismissed the consumer’s motion to set aside the default judgment and upheld its original default judgment against the consumer dated xx October 2015. We do not consider that the FSP breached our Rules by attending the court hearing. This is because the FSP already obtained a judgment against the consumer on xx October 2015 and was attending the court to respond to the consumer’s notice to set aside the default judgment. We are unable to find that this amounted to a continuation of enforcement action as The FSP is entitled to defend itself to legal proceedings commenced by the consumer.


With the consumer being unhappy with the Review the matter was referred to the Ombudsman for Determination. The Ombdusman concluded in their Final Decision:

Decision
49. For the reasons set out in the Review and this Determination, I find that the consumer's claims have either not been made out or are outside our jurisdiction.

In summary it is now our opinion having read the Review, Determination and Decision that while enforcement of a Judgment Debt cannot continue while a complaint or dispute is before EDR that if a Defence or a Motion is filed by a consumer in the Court that the FSP has the right to respond to an action raised by a consumer.

Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relied on in any way.


FSPs Filing Police Reports [Reminder]

Thursday, March 29, 2018 - Posted by Michael McCulloch

We have again received notification from the Credit and Investments Ombudsman ("COSL") that this practice seems to be ongoing. From their March 2018 edition of CIO News we came across this reminder -

We have recently received a number of complaints against consumer lease providers, where the FSPs have reported their customers to the police. They were reported on the basis that the goods associated with the lease, were stolen as these customers had defaulted on payments.

We would like to remind our FSP members that they have enforcement rights under the National Credit Code. We would consider these as more appropriate when enforcing their rights due to non-payment. We note that this is despite a number of states have broad definitions of stealing and fraud under their criminal codes.

A decision to report goods as stolen, rather than pursue standard collections or enforcement action, does not demonstrate good industry practice.

In our November 2016 edition of Debt Collection News we reported about this very issue in Financial Service Providers Argue Criminal Proceedings Outside Ombudsman Jurisdiction.

As we indicated in our previous article it still remains unclear as to the final outcome of the investigation by COSL however as they noted in their reminder enforcement of the debt should be undertaken via the NCC and not by the police.

Source: CIO News - March 2018


Credit Repair Companies and Removing Defaults

Thursday, March 29, 2018 - Posted by Michael McCulloch

Recently we have again seen an influx of requests by credit repair companies requesting that payment defaults or Judgments be removed from consumer credit files.

Typically these requests are received after a debt has been paid in full or settled with consumers being told by credit repair companies that they can remove a default. Such a request usually involves the credit repair company forwarding a default removal request and a signed privacy consent form with reference to Section 2.23 of the Credit Reporting Code of Conduct. Of interest in receiving these requests is a demand that the request be complied with within 10 business days. This is in fact incorrect in that the credit repair companies are making reference to the repealed Part IIIA of the CRCC:

That aside the formal stance from Equifax regarding the removal of defaults can be found on their page Can I Have Information Removed from My Credit File?

Generally speaking a default will only be removed if:

  • the entire listing is incorrect;
  • the debt is Statute Barred;
  • the listing was a result of unavoidable circumstances and a new arrangement entered into with the Credit Provider

It is our recommendation that should such a request be received that:

  • you conduct a thorough review of your Code issued Notices to ensure strict compliance including the timing of the issue of each Notice;
  • copies of any such Notices be forwarded to the credit repair company;
  • it is clarified that the listing will not be removed; and
  • that correspondence received from them quoting repealed Part IIIA of the CRCC could be interpreted as misleading and deceptive conduct and future references to this section may be reported to ASIC.

If you believe that you may require an opinion regarding the legality of any such request you can contact Collection Law Partners by phone or email to obtain written advice.


Image Source: Office of the Australian Information Commissioner - Privacy Business Resource 3: Credit Reporting - What Has Changed

Disclaimer: The information contained in this article does not constitute legal advice and should not be used as such. You should obtain your own independent legal advice before acting or relying on its content.


Recovering Debt Collection Costs

Tuesday, February 27, 2018 - Posted by Michael McCulloch

A water utility supplier in Queensland brings to the light the issue of attempting to recover debt collection charges from customers.

Queensland Urban Utilities have recently come under regulatory scrutiny after they were found to be charging a debt collection fee on their overdue debts. It is reported in the Courier Mail that they are currently clarifying their legal position but in the meantime will reimburse or fogive $180,000 in debt collection fees.

The Queensland Debt Collectors (Field Agents and Collection Agents) Act 2014 forbids the collection of debt collection costs -

s27 Recovery of Costs of Debt Collector
(1) A person must not recover or attempt to recover from a debtor the costs or expenses of a debt collector for performing a debt collection activity or a repossession activity.

(2) Subsection (1) does not apply to prevent a person who appoints a debt collector to repossess goods or chattels from a debtor from recovering the debt collector’s costs and expenses if the person has a right under an agreement with the debtor or otherwise to recover the costs or expenses.

(3) Costs or expenses recovered in contravention of this section may be recovered by the debtor as a debt.

(4) This section applies subject to the National Credit Code in schedule 1 of the National Consumer Credit Protection Act 2009 (Cwlth) .

(5) In this section— 
"costs" do not include—
(a) stamp duty; or
(b) legal costs fixed by, or payable under, rules of court or a court order.
"debtor" includes a person from whom goods or chattels may be lawfully repossessed.


Similar legislation applies in New South Wales and Victoria under the NSW Commercial Agents and Private Inquiry Agents Act 2004 and Australian Consumer Law and Fair Trading Act 2012:


NSW Commercial Agents and Private Inquiry Agents Act 2004

s19 Licensee Not to Charge Debtor for Expenses of Debt Collecting

(1) A licensee must not request, demand or collect from a person (the "debtor" ) any payment for the costs or expenses incurred by the licensee in connection with the collection from that person of money due under a debt.

(2) Any money received from the debtor by a licensee in contravention of subsection (1) may be recovered by the debtor from the licensee, as a debt, in any court of competent jurisdiction.

(3) This section does not limit any right that the person to whom the debt is payable (the "creditor" ) may have at law with respect to the recovery from the debtor of the creditor's costs in recovering the debt.


Australian Consumer Law and Fair Trading Act 2012
s52 Offence to Charge Debtor for Cost of Debt Collection

(1) A debt collector must not recover, or attempt to recover, from a debtor any remuneration or payment in connection with the collection of a debt including the costs and expenses of a debt collector for—
(a) finding or attempting to find goods or chattels of the debtor;
(b) repossessing or attempting to repossess goods or chattels from the debtor;
(c) collecting or attempting to collect a debt owed by the debtor.

(2) Subsection (1) does not apply in respect of a debt collector who is recovering or attempting to recover on behalf of a creditor enforcement expenses reasonably incurred by that creditor—
(a) if a credit contract allows the recovery of those expenses; or
Note
See section 107 of the National Credit Code.
(b) in the case of a debt that was not wholly or predominately accrued in connection with personal, domestic or household purposes, if a term of an agreement between the creditor and the debtor permits the recovery of those expenses.

(3) It is a defence for an offence against subsection (1) that the debt collector had an honest and reasonable belief that the enforcement expenses that he or she was recovering or attempting to recover did not exceed those reasonably incurred by the creditor.

(4) Any costs or expenses recovered in contravention of subsection (1)—
(a) may be recovered by the debtor as a debt; and
(b) if the debt collector is the creditor—
(i) may be set off against the debt; or
(ii) may be recovered by the debtor from the debt collector or the creditor.

(5) In this section—
"costs" do not include—
(a) stamp duty; or
(b) legal costs fixed by, or payable under, rules of court or a court order;
credit contract has the meaning given by section 4 of the National Credit Code;

"creditor" includes a partner, employer, employee, principal or agent of the creditor or a person who is in any way acting in collusion with the creditor;
"debt collector" means a person who engages in debt collection—
(a) as a principal or agent;
(b) as an employee of a principal or agent in exchange for salary, wages or commission;
"debtor" includes a person from whom goods or chattels may be lawfully repossessed.


For further reading we refer you to ACCC v Sampson [2011] FCA 1165.

The ACCC has previously written to agencies and Solicitors who act in the debt collection industry reminding them:

  1. If something is only a possible consequence of not paying a debt, you must ensure that you do not create an impression that it is a definite consequence
  2. Before asserting the right to payment of administrative and or legal costs you must ensure that you are aware of whether or not there is a legal entitlement to claim any such costs
  3. You cannot create an impression that a debt collection letter, demand or notice are documents which have been authorised by a Court or able to be filed with a Court.
For further clarification regarding the contents of this article or to have your Terms and Conditions reviewed so reasonable debt collection fees and charges may be collected please contact Collection Law Partners to discuss your requirements.

Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relied on in any way.

Banned Debt Collection Practices

Saturday, December 30, 2017 - Posted by Michael McCulloch

Consumer Affairs Victoria has recently re-released an article which outlines the debt collection practices that are banned in Victoria.

The ban covers the following:

  1. Entering or threatening to enter a private residence without lawful authority
  2. Using any threat, deception or misrepresentation to obtain consent to enter a private residence
  3. Refusing to leave a private residence or workplace when asked to do so
  4. Exposing or threatening to expose a person or a member of that person’s family to ridicule or intimidation
  5. Using a document that looks like an official document but is not
  6. Impersonating a government employee or agent
  7. Attempting or threatening to possess any property to which you are not entitled. For example, when collecting a debt, you must not say you are going to seize a home or other property that you cannot legally take
  8. Disclosing or threatening to disclose debt information, without the debtor’s consent, to any person who does not have a legitimate interest in the information
  9. Making a false or misleading representation regarding the nature or extent of a debt, or the consequences of not paying a debt. For example:
    (a): Falsely representing that a debt is a fine or other penalty imposed by law, or that a person has committed an offence
    (b): Threatening to make a false or misleading credit report.
  10. Contacting a person by a method that they have asked not to be used, unless there is no other means available. For example, you must not contact a debtor at their workplace when they have asked to be contacted only at home, or contact them directly when they have asked that all communications be handled by their lawyer or financial counsellor
  11. Contacting a person about a debt after they have advised in writing that no further communication should be made about that debt. This applies unless you:
    (a): Contact the debtor through an action issued by a court or the Victorian Civil and Administrative Tribunal (VCAT)
    (b): Are threatening the debtor with court or VCAT action that the creditor intends to take
    (c): Are communicating with the person to comply with a requirement under the National Credit Code.
  12. Communicating with a person under 18 about a debt, if the person is not the debtor
  13. Demanding payment of a debt from someone without having a reasonable belief that they are the debtor. For example, demanding payment from every ‘J Smith’ who resides in a suburb in an attempt to collect a debt owed by John Smith
  14. Communicating with a person in a manner that is unreasonable in its frequency, nature or content.

The ban extends to Mercantile Agents (debt collection agencies), Commercial Agents (process servers, repossession agents, etc) but to also those employed, directly or indirectly, by a business or individual to make a demand for payment of a debt including collection officers, accounts receivables clerks, credit managers, etc

It should be noted that the banned practices as outlined above should also be read in conjunction with RG 96 Debt Collection Guidelines as produced by the Australian Competition and Consumer Commission and ASIC.


Who Do Debt Collection Guidelines Apply To?

Monday, October 30, 2017 - Posted by Michael McCulloch

Originally released in October 2005, by the Australian Competition & Consumer Commission ("ACCC") and the Australian Securities and Investments Commission ("ASIC"), the Debt Collection Guidelines for Collectors and Creditors was jointly produced to ensure that debt collection activity is undertaken in a way that is consistent with consumer protection laws.

The guidelines apply to not only Mercantile Agents (debt collection agencies) and Commercial Agents (process servers, repossession agents, etc) but to anyone that is employed, directly or indirectly, by a business or individual to make a demand for payment of a debt. This includes collection officers, accounts receivables clerks and credit managers.

Page 1 of the guidelines state:

WHO IS THIS GUIDELINE FOR?

This guideline will help you to understand how the Commonwealth consumer protection laws apply to you if you are a:

  • Debt collector (including a debt collection agency, debt buy-out service, in-house collection department of a business or Government agency, Solicitor and other)
  • Creditor who uses external collection agencies to collect debts or sells or assigns debts to third parties

This guideline applies to both Creditors who are directly involved in debt collection and to specialist external agencies who provide debt collection services. When a Creditor uses an agent for collection, the Creditor (as principal) will generally be liable for their agent's conduct when that conduct comes within the agent's express, implied or ostensible authority.

Key points from the guideline include:

  • Clearly identifying yourself when making contact with a debtor
  • That you are entitled to make reasonable inquiries when a debtor advises he or she is not able to pay
  • That you should never disclose any information about the debtor or their debt to an unauthorised 3rd party
  • That telephone contact should be made during reasonable hours of the day (Monday to Friday - 7.30am to 9.00pm | Weekends - 9.00am to 9.00pm)
  • Avoiding contact with a debtor via a method that he or she has specifically requested not be used
  • That contact should be free of intimidation or humiliation
  • If a debtor has introduced a 3rd party representative that communication with this authorised representative should continue unless the 3rd party does not have instructions from the debtor or the 3rd party fails to respond to communications from you
  • Evidence of the debt should be presented upon request
  • That you must be cautious about making representations about the consequences of non-payment or the legal status of the debt

You can download a copy of the most recent via this link.


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