The debt collection guidelines in Australia are a summary of the rules and responsibilities that apply to creditors and debt collection agents in the country. These guidelines are based on relevant sections of the Australian Consumer Law, the ASIC Act, the National Credit Code and other Australian laws covering debt collection conduct.
The 2017 version was written after consultation with industry and consumer representatives, and focuses primarily on the collection of debt from individuals. Australian business owners, large or small, are steadily being advised to familiarise themselves with debt collection guidelines set by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) which offer a set of approaches for all parties involved in the debt collection process.
This guide has since been revised and a new version published, after the ASIC and the ACCC’s extensive consultation with industry and consumer representatives. It now incorporates recent court rulings and realistic examples in order to assist creditors, collectors, and debtors in several areas of concern.
The guideline covers Commonwealth consumer protection laws, such as the ACL, and other relevant legislation. It was established with particular emphasis on debt collection from individual debtors. Many of the laws and principles covered and discussed by the guideline, however, are also necessary to the collection of corporate and business debts, particularly small business debts.
The guidelines, when followed, will help reduce the need for collection activity. When collectors are flexible and fair and debtors prompt and responsible, a realistic debt collection agreement and process will be achieved. They also provide a practical and realistic set of approaches for all parties involved in the debt collection process.
Have it in mind that when you conduct debt collection in an ethical manner, there is already a good chance you are on the right side of the law. Nonetheless, familiarising yourself with the details and specifics of the do’s and don’ts, as well as the suggested practices, will help you not only legally conduct debt collection but also ensure the probability of satisfactorily completing the process—and even getting a prompt repayment.
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Key Points from the Australian Debt Collection Guidelines
As a general guide, ASIC’s jurisdiction covers situations in which the underlying debt relates to the provision of a financial service, including a credit facility. Debts in relation to the provision of goods and services other than financial services will fall within the jurisdiction of the ACCC. Here is a list of key points from the guideline, to help you with the debt collection process:
- Identify yourself when making a contact with a debtor
- You are entitled to make reasonable inquiries when a debtor advises he or she is not able to pay
- Never disclose any information about the debtor to third parties
- Observe propriety when contacting a debtor—contact should be made during reasonable hours of the day (for example, 8 am to 8 pm)
- Avoid contacting a debtor via a method he or she specifically advised not to be used
- Make sure to maintain professionalism at all times when contacting a debtor
- Contact should be free of intimidation or humiliation
- Face-to-face visits should be an option of last resort in debt collection (for example, seeing the debtor at their workplace)
- Never trespass nor attempt to
- If a debtor has introduced a representation, then contacting the debtor personally should be one of your last options
- Upon request, evidence of debt should be presented
- Caution and professionalism should be observed at all times when making representations about the consequences of non-payment or the legal status of the debt
Guidelines for Debt Collection Process in Australia
It’s very necessary to be aware that a professional debt collection agency will have a clear and articulated process in place that can be tailored to each unique circumstance.
Notification of Debt to Debtor
Note that making contact with a debtor is the first step in the debt collection process and this more or less begins with a simple letter or phone call. If you have tried to contact your debtor on a number of occasions with no success, you are expected to move onto more formal proceedings to try and speed up the process. This would include sending out a debt collection letter, also known as a ‘Letter of Demand’.
A debt collection letter is the final step to advise the debtor that unless their account is settled within ‘X’ number of days (usually 5 to 14 days), their account will be passed to a debt collection agency which may result in legal proceedings.
In Australia, the debt collection guidelines enable telephone contact with the debtor but this is expected to be made within certain parameters such as what is regarded as contact made at a reasonable hour. Telephone contact can be used to confirm the amount of debt and the status, any specific consequences of non-payment, the debtor’s options for payment, and the steps the agency will take if the debt remains unpaid.
Issue of Complaint
If contact by the debt collection agency fails to yield results or settlement of the outstanding money, the next step is for the agency to institute an Issue of Complaint on your business’ behalf. The Issue of Complaint is the beginning of the legal process to collect the debt through the court system.
Even though the main purpose is to always avoid any form of court action, this step in the debt collection process is best left to a debt collection agency as they employ lawyers who are skilled and experienced in the submission of court papers with the correct and relevant details.
Service of Complaint
This is the legal recognition that an issue of complaint has been made. The Service of Complaint is sent in hard copy to the debtor and creditor. The debtor also receives a Notice of Defense in which they can attest as to why they have refused to accept the claim or to set out their defense. If the debtor fails to respond to the Service of Complaint, the court will rule against them and order the debt to be paid.
At this point, the debtor can propose a payment arrangement by instalment. The court will accept this under most circumstances. Howbeit, if there is an inability to pay or the debtor simply doesn’t pay, the debt collection agency can pursue various options including a warrant to seize assets, issuance of a bankruptcy notice, and a winding up petition.
The debt collection guidelines protect the debtor’s rights, but also protects the sole trader or company in pursuance of their business. Failure to comply with the guidelines may result in an unfavourable decision that leads to you having to write the debt off.
The guideline notes that the stipulated times for when face-to-face contact is appropriate must be considered in conjunction with the section of the guideline covering face-to-face contact. It is recommended that face-to-face contact should only be made when it is both necessary and reasonable, and only considered as a last resort.