Debt Collectors: Do You Know Your Legal Obligations?
Debt collectors have a range of obligations under the Competition and Consumer Act, the Australian Securities and Investments Commission Act, and the Office of Fair Trading in each Australian state or territory.
ASIC and the ACCC are the regulatory bodies that monitor the debt collection industry and ensure that debt collectors are complying with the law.
So how do you make sure you are compliant? One way is to ensure your employees or agents receive compliance training on a regular basis. There are plenty of good training providers out there offering a variety of different delivery methods; the most popular being online courses.
In general terms, to remain compliant, debt collectors must follow the guidelines set out by the ACCC and ASIC. These guidelines apply to debt collectors, collection agencies, corporate in-house collection departments and government bodies using outside collection agencies.
In brief, the guidelines are as follows. As the creditor or debt recovery agent, you:
- Must not threaten the debtor with any kind of action you are not legally allowed to take.
- Must take the debtor’s financial situation into account and devise a repayment plan that the
debtor is reasonably able to comply with.
- Must abide by the requirements of the Privacy Act.
- Must accurately explain the consequences of non-payment to the debtor, including any
legal recourse available to them.
- Must not scare, intimidate or demoralise a debtor or embarrass them in front of others.
- Must not reveal the details of a debt to any other party, including the debtor’s family.
- Must not mislead the debtor in any way or misrepresent who you are.
- Must provide relevant information about the debt upon request.
- Must fully investigate a debtor’s denial of a debt before collection action can continue.
- Must always use the phone or mail for contact, unless this is ignored by the debtor.
- Must not harass the debtor with overly frequent contacts (preferably no more than 3 times a
week or 10 times a month).
- Must only make contact with a solicitor or third party representative when one is nominated
by the debtor.
- Must only telephone the debtor between 7.30am and 9pm on week days and between 9am
and 9pm on weekends.
- Must only contact the debtor face-to-face between 9am and 9pm on week days and
between 9am and 9pm on weekends.
- Must not contact the debtor at all on public holidays.
- Must not contact the debtor at their workplace, unless they own the business or have
specifically agreed for you to do so.
- Must only pursue a debtor if you have reasonable grounds to believe they are liable for that
Penalties for non-compliance can be severe (several hundred thousand dollars for individuals and more than a million dollars for companies) and creditors are generally liable for the actions of their collection agents.
That’s why compliance training that includes a record of knowledge test as part of a learning management system would be money well invested for anyone employed in the debt recovery business.