Loans and debts are available in the form of services or sometimes given as a favour by a friend or a family member. There is no shame in admitting that you need some financial assistance. However, regardless of whether you are the debtor or the creditor, understanding Australia’s debt collection guidelines can benefit you in many ways.
Debt Collection Guideline for Collectors and Creditors
The Debt collection guideline for collectors & creditors was released by the Australian Competition and Consumer Commission (ACCC) and Australian Security and Investments Commission (ASIC) to help people who owe money (the debtor) and people who owe money to (the creditor). It contains comprehensive information about the rights and obligations of both parties during the debt collection process. This guide identifies what is allowed and not allowed under consumer protection laws and other relevant legislation.
What Does This Guide Contain?
This contains a summary of the rules, responsibilities and obligations that creditors and debtors should observe. The rules within this guide are based on the Australian Consumer Law, the ASIC Act, the National Credit Code and other Australian laws covering debt collection conduct. The debt collection guideline for collectors & creditors was initially released in 2015 but was updated last 2017 after consulting with industry and consumer representatives. The newer version focuses mainly on the collection of debt from individuals.
Obligations of a Debtor
The debt collection guideline for collectors and creditors is dedicated to explaining what creditors (like banks and other loan providers, including debt collectors and debt collection agents) are permitted and prohibited from doing under the law. You can expect these companies or establishments to do their part in the process, but this does not alleviate you from any of your own responsibilities.
If you are in debt, you are expected and are legally responsible for paying back the amount you owe from your creditor. The guideline states that you should do the following:
- Be responsible for your debt. Do not avoid or even attempt to avoid your obligation as a debtor to repay the money that you owe.
- Communicate openly with your creditors or debt collectors.. Let them know about your situation including if you are experiencing financial difficulties so that there will be an opportunity for all parties to negotiate an amended payment agreement in good faith.
- Be honest about your financial status. Let your creditors know about your financial situation right off the bat. You should inform them if you have any other debts that need to be paid.
The guide recommends that you should also get in touch with a financial counsellor, financial lawyer, or other qualified advisers for better understanding of your position. Hiring finance or legal professionals can be a huge help in negotiating your debt.
Knowing what your creditors and debt collection agencies can or cannot do will help you as well. This can help you avoid falling victim to illegal or prohibited debt-recollection tactics.
Creditors, Debt Collection Agencies and Businesses: How Should They Behave?
If people owe you money, (or if you are part of a debt collection agency) you should have an apt understanding the debt collection guideline for collectors and creditors. Debtors can also benefit from understanding the guidelines for their creditors as this helps them know how they, as debtors, should be treated. The guidelines state that you should do the following if you are a creditor:
- Be flexible, fair and realistic in handling debt collection. Creditors are expected to recognise when their debtors are not in the financial position to handle repayments; especially in cases that they cannot control. For example, unemployment, serious illness or family breakdown.
- Be open for negotiation in case the debtor needs to have a more sustainable payment arrangement.
- Avoid impoverishment or humiliation of your debtors.
- Be reasonable when assessing a debtor’s financial situation.
Debt Collection with Lawyers in Sydney
There are two ways in which creditors can enforce or recover debt. They can do it through the courts or by hiring a collection agency or finance lawyer in Sydney.
If a creditor chooses to hire a debt collection agency or the assistance of a financial law firm in Sydney (or anywhere else in Australia), then it involves outsourcing responsibility for collecting the debt to a third party.
If you are a creditor who chooses to hire an agency to manage your debt collection, then of course, expect that you might need to pay a commission when the debt is successfully collected and paid by the debtor.
On the other hand, the guideline says that debt enforcement through the court system will be regulated by both the courts themselves and state/territory law. You can also use the help of a lawyer here. Choosing to handle debt collection through the court allows you to have little risk of infringing any laws.
Here are some of the responsibilities of creditors when making use of third-party collection agents:
- You, as the creditor, will generally be held responsible for the actions of the debt collection agent or lawyer does in an attempt to enforce a debt on your behalf.
- If a debt collection agency acts improperly towards a debtor, you as the creditor may be held responsible (even if the actions were performed without your permission.)
In essence, if you ever choose to hire a debt collection service provider, then you will be legally responsible for their conduct. It is best that you work with a lawyer in Sydney who specialises in financial law and is familiar with the guidelines.
Third-party Debt Collector Conduct
If you are a creditor, you should be careful in choosing your debt collector agency. Many actions and behaviours are illegal for debt collectors. Some of these prohibited behaviours and actions include:
- Threatening to take legal action that they are not legally permitted to take, do not have instructions or authority to take, or have no intention to take. Unless you have hired a lawyer in Sydney who thinks legal action must be taken– then there is no need for the debt collector to make threats.
- Lying about being legally entitled to seize goods or assets.
- Violating the privacy of the debtor or doing anything which could reveal to others that the debtor has a debt.
- Misrepresenting the debtor’s identity in any way.
- Conducting frequent and unreasonable contact. This may amount to harassment.
- Visiting a debtor’s home or workplace without their explicit permission.
- Contacting a debtor outside of reasonable contact times.
Note: In case there is a dispute regarding a debt, the third-party debt collector should stop any collection activity. They may only resume once the creditor receives any information that has been reasonably requested and the debt has been confirmed. The creditor should not make a default listing.
Reasonable Contact Time
As mentioned previously, the creditor or the debt collector should only contact the debtor during reasonable hours. This means that if you are a creditor, you should consider the debtor’s circumstances and reasonable wishes.
Here’s a list of reasonable contact times to get in touch with your debtor.
- Through the phone: 7:30 AM to 9:00PM (Monday to Friday), 9:00AM to 9:00PM (Weekends), No contact recommended for National Public Holidays.
- Face-to-face: 9:00 AM to 9:00PM (Monday to Friday), 9:00AM to 9:00PM (Weekends), No contact recommended for National Public Holidays.
- Workplace: Consult with the debtor.
Most of the time, contacting the debtor through the phone should be enough. But regardless where or how the creditor wants to contact the debtor, they should be considerate enough to understand that there may be reasons why the debtor may not be able to speak with them during one of the given times above.
Common Reasons Why Debtors Ask for a Different Contact Time
The time indicated above does not apply to everyone. For example, a debtor may ask their creditor to contact them at more restricted times due to reasons like:
- Being a shift worker.
- Being responsible for children or caring for a family member, and certain contact times are not convenient.
- Preference to be contacted when other family members are not around.
In these cases, the creditor must respect the debtor’s requests, especially if the requested contact times are within reason.
If you are a debtor and you feel like you are being harassed or threatened by your creditor or their debt collection agency, then you should hire a lawyer in Sydney and lodge a consumer complaint with them.
Whether you are a creditor or a debtor, you have responsibilities and obligations to take care of but you also need to know that you have rights. It is the creditor’s right to get their money back, while it is a debtor’s right to not be harassed over their debt. Regardless of which side you are on, familiarising yourself with the debt collection guideline for collectors & creditors can help you understand how debt enforcement should be processed. In case any of your rights as a creditor or a debtor are compromised, you can get in touch with a lawyer in Sydney for consultation on the options that are available for your situation.