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If you have ever received a call from a private debt collector, perhaps demanding payment for an overdue bill you barely remember, you will know that it can feel daunting and rife with potentially serious consequences.
The best way to protect yourself in such a situation, particularly with the cost-of-living crisis driving more and more Australians to financial stress, is to understand your rights and the rules governing the way debt collectors can behave.
The basics
Most of the rules governing debt collection sit in debt collection guidelines produced by the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission, the watchdogs responsible for enforcing consumer protection laws.
As a general guide, they say debt collectors must always treat you with “fairness, respect and courtesy”. The guidelines themselves don’t carry legal force, but they do reference laws that can be enforced against debt collectors, which are mostly found in Australian Consumer Law, the National Credit Code and the Privacy Act.
There are all sorts of rules about how a debt collector must behave when they first contact you.
Privacy laws mean that debt collectors are obliged to protect a debtor’s confidentiality.
They must make sure that you are the right person (as in, the person they are alleging owes the debt). This must be done first and foremost.
They must take particular care not to disclose information about the debt or their debt collection activities to other people. That means they must take care when speaking to you at your workplace or in other public spaces, including on social media.
Debt collectors must not misrepresent their identity and you can, if you wish, ask them to keep their contact to your preferred medium, something they are obliged to respect.
Contact must only be made for a reasonable purpose limited only to providing necessary information.
The ACCC says that can include, for example, giving information to a debtor about their account, making a payment demand, or explaining accurately the consequences of non-payment. Contact must not frighten or intimidate, demoralise, exhaust or embarrass you.
If you ask for time to speak to a financial counsellor, the guidelines state that debt collectors must not contact you “until after a reasonable time has passed, allowing [you] to obtain advice so that [you] may better understand [your] options”.
Debt collectors must only make contact at reasonable hours.
There are rules around how many times they can contact you within a week. The guidelines recommend contact is only made three times a week, or 10 times a month. Any more than that might be considered undue harassment, an offence under Australian consumer law.
Most contact will happen over the phone. But debt collectors can make face-to-face contact as a last resort, where phone calls, emails or letters have failed.
The guidelines state this should only occur once a month, and that home visits during reasonable hours are preferred, with visits to your workplace an absolute last resort.
Debt collectors must leave your home if you ask them to do so.
Debt collectors are also limited in the number of times they can contact third parties to obtain information about you. They can only do this once every six months.
Obtaining advice and representation
You have the right to seek financial or legal advice about your debt.
If you tell the debt collector that you have a financial counsellor, community worker, lawyer or guardian representing you in relation to the debt, they must only deal with that representative and cease contact with you directly, except under limited circumstances.
What information can you request from debt collectors?
The answer to this question depends partly on the type of debt you owe.
For normal consumer debts – think phone bills or gym memberships – you can request copies of contracts and related documents. These must be provided with minimal delay.
Failing to provide them can constitute misleading or deceptive conduct, or unconscionable conduct, which are breaches of consumer law.
If your debt is financial services-related – think loans and credit cards – the law states debt collectors must give you a statement of amount owing, a statement of the payout figure and copies of contracts and other documents.
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What happens if I dispute that I owe the debt?
The guidelines tell debt collectors they must suspend collection activity if you dispute the debt, dispute your identity as the debtor, or tell them the debt has already been paid, unless they have already conclusively proved your identity and liability.
If they proceed with debt collection in such circumstances, they are likely breaching the law.
How long does a debt last?
In most states, there is a legal time limit of six years within which a debt must be collected. Debt collectors cannot take you to court after this period to recover the money.
It is important to remember that this time limit can restart when you acknowledge a debt or make payment on a debt.
Intimidation, aggression and misrepresenting consequences of non-payment
As you’d expect, there are strict rules preventing debt collectors from using abusive or aggressive language or behaviour to make you pay.
The guidelines say debt collectors must not do any of the following:
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Use, or threaten to use, violence or physical force against a debtor.
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Adopt an aggressive, threatening or intimidating manner.
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Use abusive, offensive, obscene or discriminatory language.
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Comment on a debtor’s position, physical appearance, intelligence or other characteristics or circumstances.
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Embarrass or shame a debtor.
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Make disrespectful or demeaning remarks about a debtor’s character or financial situation in life.
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Mislead a debtor about the nature or extent of a debt, or the consequences of non-payment.
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Pressure a debtor by misleading, harassing, threatening or putting pressure on a debtor’s spouse or partner, or a member of a debtor’s family.
Debt collectors also cannot misrepresent the consequences of you failing to pay.
For example, they can’t tell you they’ll take your home if the debt isn’t secured by property or unless they have obtained a court judgment and served you with asset seizure notices.
They are not permitted to add fees or charges to the debt if payment is not made unless it is specifically allowed for in your original contract with whoever sold you the goods or services.
Debt collectors can’t tell you that non-payment will have consequences for your job or that you’re obliged to make repayments from your social security payments.
They also cannot threaten a police referral or raise the prospect of criminal charges unless you’ve committed fraud or some other criminal offence.
Where do I go if I’m concerned about a debt collector’s behaviour?
The Australian Financial Complaints Authority (Afca) runs an external dispute resolution service which fields complaints about debt collectors and attempts to manage disagreements.
Afca cannot fine debt collectors. It is not a government body.
But it can make binding decisions on Afca members that award compensation for losses suffered due to error or inappropriate conduct. It can consider complaints about misleading and deceptive conduct, unconscionable conduct, non-disclosure, credit reporting, financial difficulty and service quality.
You can also complain to the ACCC.
The ACCC does not involve itself in individual disputes about debt. But it can consider and enforce breaches of Australian consumer law, including false or misleading representations, harassment or coercion and unconscionable conduct. It can issue fines and take debt collectors to court, or enter them into enforceable undertakings.
For debts that relate to financial services, you can complain to Asic, which is able to also investigate misleading conduct, harassment, coercion and unconscionable conduct.
You can also access free services and advice from a financial counsellor by calling the National Debt Helpline on 1800 007 007.