Every collector in Australia is bound by national consumer law, which forbids physical force, undue harassment, coercion and misleading or deceptive conduct; the ACCC and ASIC explain how it applies in their joint debt collection guideline. New South Wales, Victoria, Western Australia and the Northern Territory each add conduct rules of their own.
General informationAbout the rules collectors work under, not legal advice about any debt or any collector’s conduct. The guideline itself is published by ASIC, and the state rules are on the pages of NSW Fair Trading, Consumer Affairs Victoria and Consumer Protection WA.
A guideline for the collector, and the creditor
The guideline was first published in 2005 and has since been revised for major legal changes: the arrival of the Australian Consumer Law in 2011, the national consumer credit law of 2009, and privacy law. It is written for collection agencies, debt buy-out services, in-house collection departments of businesses and government agencies, and solicitors who collect, as well as for creditors who use them.
Creditors cannot hand the risk away with the file. The guideline says a creditor will generally be liable for its agent’s conduct within the agent’s authority, may be responsible even where the agent breaks an agreement about how to collect, and may stay liable for misconduct that happened before it sold or assigned the debt. At its core are two sections of the Australian Consumer Law, which the guideline quotes beside their twins for financial services, sections 12DJ and 12DA of the ASIC Act:
“A person must not use physical force, undue harassment or coercion in connection with the supply or possible supply of goods or services or the payment for goods or services.”
Section 50 of the ACL, quoted in the ACCC and ASIC guideline
“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”
Section 18 of the ACL, quoted in the ACCC and ASIC guideline
What a demand letter may say
Much of the guideline is about words on paper. Letters, including ones a system sends automatically, are meant to match the collector’s records and what was said to the debtor.
The guideline says correspondence must not misstate:
- how often contact was tried, such as claiming “numerous” calls or letters that were never made or sent
- what is owed, such as implying the debtor must pay collection fees or legal costs the collector has no right to claim
- the amount, by demanding a sum that ignores payments already made.
It also warns against messages that disguise their purpose or create a false sense of urgency. Its example is an unsigned message marked urgent, which could leave someone fearing a personal emergency.
On what happens if a debt goes unpaid, a collector may explain the consequences accurately but must not misrepresent them, and must not state or imply, among other things:
- that a home or other property will be taken immediately, when the debt is not secured on it, or before judgment has been obtained and every necessary notice served
- that judgment has been obtained when it has not
- that fees or charges will be added when the law does not permit them, or when there is no contractual right to add them
- that not paying will affect the person’s job or ability to earn an income.
The rule runs both ways: a collector also must not suggest that no action will follow when proceedings are intended or under consideration.
Documents that pretend to be something else
Western Australia’s Fair Trading Act bans letters of demand designed to look like court documents. Victoria bans using a document that looks official but is not, and impersonating a government employee or agent. Consumer Protection WA gives impersonating someone and putting a false letterhead on a document as examples of misleading conduct, and notes that a collector can mislead without meaning to, sometimes simply by leaving information out. In South Australia a licensed agent must not claim a power or authority the licence does not give.
The rules each state adds
New South Wales: the commercial agent rules
The rules set standards of conduct for every commercial agent, licensed or not, and penalties apply for breaking them. Among them, an agent must not:
- use coercive, intimidating or unconscionable conduct
- collect a debt that cannot be the subject of a demand
- misinform, mislead or deceive anyone while doing the work.
Victoria: banned practices
Victoria’s banned list includes exposing a person or their family to ridicule or intimidation, or threatening to; and disclosing debt information, without the debtor’s consent, to anyone with no legitimate interest in it. The maximum is 240 penalty units for a person and 1,200 for a corporation, and a court or tribunal can order damages of up to $10,000. A business that hires a collector can face criminal penalties if it helps bring about the collector’s offence or takes part in its breach of consumer law.
Western Australia: the Fair Trading Act
Physical force, undue harassment and coercion to obtain payment are prohibited, including when aimed at a third party such as a family member. Collectors must not apply undue pressure or unfair tactics, above all to people who are vulnerable or disadvantaged, and someone who suffers loss from a breach can claim damages.
Northern Territory: harassing tactics
An agent must not use harassing tactics. The Act defines them as conduct that tends to intimidate, embarrass, ridicule or shame, including parking a vehicle where a passer-by could tell an agent is visiting, unduly frequent visits or calls, and hinting that not paying could embarrass the debtor or harm them at work.
Who pays for the collecting
In Victoria it is illegal for a debt collector to recover, or try to recover, the costs of collecting from the debtor, including the collector’s own costs and expenses. The rule does not apply where a credit contract allows enforcement expenses to be recovered, where the costs are stamp duty or legal costs set by court rules or a court order, or where a business debt carries an agreed term allowing collection costs. The maximum penalty for charging a debtor for collection is 120 penalty units.
In New South Wales, a commercial agent must not demand or collect payment for the cost of the agent’s work from the person the work is directed at.
Complaints inside the business
The guideline says complaints and disputes must never be ignored, and that a business needs working processes to log and assess them. It is not acceptable, it adds, to insist that a complaint be in writing, or labelled as a complaint, before it is looked at. A company is liable for what its staff and agents do even when they break the law without meaning to. The fifth guide covers complaints to the regulators.