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Debt Collection News

Released every month our debt collection blog contains news, stories and tips to keep you informed.

Federal Court Fines Debt Collection Agency $750K

Wednesday, January 30, 2019 - Posted by Michael McCulloch

You may recall in our August 2018 edition of Debt Collection News that we reported that the Federal Court found against a debt collection company acting for Telstra after proceedings were commenced by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities & Investments Commission (ASIC).

It has now been revealed by Yahoo! Finance that the Federal Court has ordered the debt collection agency involved to pay $750,000 in penalties for intimidation and harassment of the 2 customers who collectively owed $8,920.

The debt collection agency involved in the proceedings was ruled last year to have violated Australian Consumer Law after the ACCC commenced legal action in June 2016 where it was alleged that the agency had contacted a stroke victim on more than 40 occasions demanding payment including 20 demands made by letter despite the customer indicating to the agency that he had difficulty in speaking and could only utter single words like "stroke", "no" and "speech" in an attempt to indicate that he was disabled and unable to communicate.

ACCC Commissioner, Sarah Court, said in a statement, ".... continued harassment and intimidation of a care facility resident who had difficulty speaking after suffering multiple strokes is one of the worst cases of unconscionable conduct we have seen in the debt collection sector .... conduct towards another consumer who was in difficult financial circumstances, which included giving false information and making empty threats of court action, was also particularly egregious."

Commissioner Court went on to say, "Unconscionable conduct such as harassment, intimidation and coercion of consumers is unacceptable to not only the ACCC and the court, but the wider community."

A spokeperson for Telstra distanced the company from the proceedings stating, “collection activity is being conducted on behalf of the new owner, not on Telstra’s behalf” and that the telco sells debt to a third party only as a last resort."

Federal Court Finds Against Debt Collection Agency

Thursday, August 30, 2018 - Posted by Michael McCulloch

A debt collection agency who act for Telstra has lost their case in the Federal Court following proceedings being commenced by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC).

The proceedings, which commenced in June 2016, highlighted the pressure some agencies apply to collect payment including engaging in misleading, deceptive and unconscionable conduct in it's dealings with 2 particular customers.

The first customer, CT*, who was living in a care facility on a disability support pension, after having suffered 3 strokes, received in excess of 60 demands for payment for a debt of $5,770. The Court found that the agency knew of CT's condition, which left him with the inability to care for himself or readily speak, however called the care facility approximately 40 times and sent approximately 20 demand letters seeking payment. Several times CT was threatended with legal action despite the agency not having any plans to follow through with the threat.

In the other matter a single Victorian mother of three, who worked part time and received a Centrelink payment, was demanded to pay $3,150. It was alleged that the woman was told that legal proceedings would be commenced against her and that a payment default would be recorded. The woman in question promised a payment of 50% of the debt in an attempt to avoid legal proceedings, despite this payment leaving her unable to pay rent and meet her other day-to-day expenses.

The Judgment, which you can read online, also criticises the capitalised use of words in demand letters and the use of “the words 'could' and 'may' would reasonably be read in the light of the prominent heading to the pro forma letter, the terms of which strongly suggest that ACM intended shortly to commence legal proceedings .....".

In a statement to the media the ACCC said that they will be seeking Orders preventing agencies engaging in misleading, deceptive and unconscionable conduct and will be seeking for large fines to be imposed.

Source: itnews - July 2018

* Name noted as per the original Judgment

Cash Converters Fined $650K For Breaching Guidelines

Thursday, June 28, 2018 - Posted by Michael McCulloch

Cash Converters has again found itself in the spotlight for all the wrong reasons with ASIC finding that the company failed to meet regulatory guidelines and breaching the ASIC and ACCC Debt Collection Guidelines.

An ASIC investigation found that the pay day lender routinely breached the frequency of contact guidelines of 3 times per week or less than 10 times a month -

5. Frequency of Contact
(c) Unnecessary or unduly frequent contacts may amount to undue harassment of a debtor. We recommend that you do not contact a debtor more than three times per week, or 10 times per month at most (when contact is actually made, as distinct from attempted contact) and only when it is necessary to do so. This recommendation does not apply to face-to-face contact which is specifically addressed below. 

The investigation also uncovered that a related company, Safrock Finance Corporation (QLD), was also found to have provided incorrect information to a credit reporting agency. The error resulted in 38,500 customer being reported  inaccurate amount owing over a 1 month period. According to ASIC the financier has since worked with Equifax to ensure all incorrect credit listings have been removed.

ASIC has since imposed licence conditions on Cash Converters which includes outsourcing all of their debt recovery to a 3rd party collection agency and must seek consent from ASIC prior to bringing these activities back in-house.

In retribution this time around, Cash Converters has paid $650,000 in community benefits payments to the National Debt Helpline for breaching the Guidelines.

Peter Kell, ASIC Deputy chair, said in a statement to the media, "Consumers expect to be treated fairly and in a manner that complies with consumer protection laws. ASIC expects all financial service providers to have appropriate systems and controls in place to ensure that debt collection practices are consistent with the guidelines. It is also critical that licensees ensure that credit information provided to credit bureaus is accurate."

This is not the first time that Cash Converters has been investigated by ASIC. You may recall that in our May 2017 blog post that Cash Converters were fined and paid $1.35 million in penalties for breaching responsible lending conduct provisions and refunded consumers $10.8 million in fees through a consumer remediation program.

You can download a copy of the ASIC and ACCC Debt Collection Guidelines from their website.

Source: TheAdvisor - May 2018

Phone Book Publisher Fined Over Fake Debt Collection

Thursday, June 29, 2017 - Posted by Michael McCulloch

A phone book publisher, Local Blue Pages, has been fined $40,000 by the Magistrates' Court for coercive debt collection.

The phone book, which is primarily delivered in the Melbourne metropolitan area, contains advertisements from small businesses however following an investigation by Consumer Affairs Victoria it was found that Local Blue Pages had harassed 4 advertisers between 2014 and 2016 using illegal debt collection tactics.

These tactics included:

  • Establishing a fake debt collection agency;
  • Misrepresenting and overstating the consequences of non-payment;
  • Serving documents pertaining to be issued by the Victorian Civil and Administrative Tribunal ("VCAT") which were never lodged with the tribunal;
  • Creating an impression that legal action had commenced; and
  • Continually making demands for payment where the business owner was not liable
Owner of Local Blue Pages, Les Papaioannou, was also personally fined $5,000 and said in a statement, "They have made me a scapegoat. All I was doing was chasing the debt that people owed me. In my opinion we made some mistakes, but I wasn't trying to rip anyone off I was just trying to chase my accounts".

Director on Consumer Affairs Victoria, Simon Cohen, said, "The threats made by Local Blue Pages undoubtedly caused a great deal of stress to victims."

Mr Papaioannou said in a later statement that Local Blue Pages has since changed its debt recovery proceedings as a result of the Court case.

Fair Trading Investigate SEO Company

Sunday, October 30, 2016 - Posted by Michael McCulloch

A Sydney based SEO ("Search Engine Optimisation") company allegedly contacting 3rd parties in relation to an outstanding debt is currently being investigated by NSW Fair Trading over potential breaches of Australian Consumer Law.

The company, Search Results Specialists, appears to undertake their own debt collection activities and after having invoices go unpaid by La Mona Beauty it is alleged that they contacted 3rd parties, including the owners daughter's boyfriends employer, the owners son's boss as well as the Local Council and suppliers to the debtor.

Search Result Specialists claimed that La Mona Beauty owed $1,400 for SEO work performed however the owner, Nidhal Robb, denied utilising their services and asked for evidence which was not forthcoming.

It is being reported that the matter has now been settled by the parties, NSW Fair Trading have indicated that since 2014, 64 complaints have been received about Search Results Specialists including 12 in this year alone.

While this is certainly not an isolated incident for Search Results Specialists it should serve as a reminder to anyone undertaking the collection of debts that you must comply with not only Australian Consumer Law but also the ACCC / ASIC Debt Collection Guidelines

Source: Daily Telegraph - Public Defender: Search Results Specialists Will Hound People You Know If You Owe Them Money

Lawsuit Filed Against Panthera Finance

Wednesday, July 27, 2016 - Posted by Michael McCulloch

Debt purchase company, Panthera Finance, is fighting a lawsuit commenced by Consumer Action Law Centre on behalf of Edwina Crawford, an alleged single mother claiming harassment and alleged breaches of the Debt Collection Guidelines.

The lawsuit filed in the Victorian Civil and Administrative Tribunal claims:

  • Panthera Finance acted illegally;
  • That Ms Crawford was harassed; and
  • Panthera Finance made certain misrepresentation of about the consequences of non-payment.

It is alleged that Panthera Finance contacted Ms Crawford on 10 occasions in a fortnightly period after it was explained by her that she had 4 children and was in receipt of a Centrelink pension and was unable to service the debt.

In response to the allegations Panthera Finance released the following statement:

"We deny all allegations made against us and will be submitting evidence to the tribunal to this effect if required. We are very aware that the law prohibits us from harassing customers, engaging in threatening behaviour, garnisheeing Centrelink benefits or seizing household goods. We have a number of safeguards in place to ensure this conduct does not occur".

Ms Crawford is seeking damages of up to $10,000.

While we are unable to comment at this stage as to the validity of the lawsuit it should serve as a timely reminder that Creditors and Collectors understand their rights and obligations and that any debt collection is undertaken in a way which is consistent to consumer protection laws across Australia.

A copy of the Debt Collection Guidelines can be downloaded from here.

ACM Contact Stroke Victim Over Telsta Debt

Tuesday, June 28, 2016 - Posted by Michael McCulloch

In a most recent article on our blog we revealed that the ACCC had commenced Court action against ACM Group.

We can now reveal that in the case of the resident in a care facility that the debt for $5,768.53 was purchased from Telstra by ACM.

It has been alleged:

  • The customer was contacted by phone on more than 40 occasions to demand payment;
  • 20 demand letters were sent to the customer between April 2011 and June 2015;
  • It was communicated to ACM that the customer could not care for himself;
  • The customer was in receipt of a Government pension; and
  • He was unable to service debt.

While ACM did take steps to make reference this in their customer log the debt was subsequently returned to a debt recovery campaign.

ACM has recently released a statement regarding the allegations on 02/06:

"ACM Group Ltd has today been notified that the Australian Competition and Consumer Commission (ACCC) has commenced civil proceedings against it in the Federal Court of Australia alleging breaches of the Australian Consumer Law in the recovery of two small Telecommunication debts.

The allegations made by the ACCC regarding the two accounts, are not representative of our hundreds of employees nor of our over 165,000 customers.

Further, the two matters do not reflect the incremental change management processes ACM has embarked on. By mid-2015, ACM had implemented numerous processes to ensure compliance and improve customer interaction. Also in 2015, to assist in positive outcomes for our customers, ACM worked with a consumer advocate to rewrite all staff training material and customer correspondence.

ACM is mindful that these matters are now before the Federal Court, and as such, it is inappropriate to make further comment".

While the statement by ACM regarding "incremental change management processes" is certainly a positive sign for future cases one would question as to why this activity existed in the first place especially with the ASIC / ACCC Debt Collection Guidelines originally being published in 2005 and subsequently updated to reflect significant changes to the law.

Unfortunately for those in the industry, that are compliant, the negative stigma attached to the industry continues with stories like this and will no doubt, in the future, require the industry to be more heavily regulated.

ACCC Commences Court Action Against ACM Group

Monday, June 06, 2016 - Posted by Philip Harvey

Court action has been commenced against ACM Group Ltd by the Australian Competition and Consumer Commission ("ACCC"). The ACCC allege that ACM engaged in conduct that breached Australian Consumer Law and / or the Australian Securities and Investments Commission Act.

The breaches include:

  • Misleading or deceptive conduct
  • Harassment and coercion
  • Unconscionable conduct in dealings with two consumers

The Court proceedings relate to two consumers where the debts purchased by ACM Group from Telstra:

Consumer 1 - A Resident In A Care Facility

Between 2011 and 2015 it is alleged that the the following took conduct took place:
  • Misleading and deceptive conduct by representing that legal proceedings were about to be commenced when this was not the case.
  • Harassment by "repeatedly contacting .... by phone and letter when ACM Group was aware that he had difficulty communicating, was highly vulnerable and had no capacity to repay the debt".

Consumer 2 - A Single Parent With Limited Income

In September 2014 it is alleged that the the following took conduct took place:
  • Misleading and deceptive conduct by representing that legal proceedings were about to be commenced when this was not the case.
  • Misleading and deceptive conduct by representing that a summons was being prepared to be issued against them when ACM was not planning to do so
  • Misleading and deceptive conduct by representing that failure to make an immediate payment would affect the ability to obtain credit for 5-7 years with no "reasonable grounds" for making such a representation.

The ACCC is also alleging that the conduct in dealings with both of these consumers was unconscionable and are seeking "pecuniary penalties, declarations, injunctions, orders for an ACL compliance program, publication orders and costs".

Debt Collector chasing debtor for $350 now owes debtor $33k

Wednesday, January 28, 2015 - Posted by Philip Harvey

A debt collector in chasing a debt of $350 had a court Judgment ordered against him in the debtors favour for $33,000 for harassment under the Fair Debt Collection Practice Act.

It is difficult to ascertain the facts of the case as the debt collector did not attend court. The allegations from the debtor included receiving 15 text messages a day, debt collection phone calls after the debt way paid, informing the debtors employer and co-workers about the existence of the debt.

The debt collector has already stated he won't be paying the fine and is not concerned about the associated credit listing the judgment will bring.

Bizarre case of debt collection harassment in the US

Wednesday, November 26, 2014 - Posted by Philip Harvey

In the US, Missouri, in what can only be described as a bizarre case, a debtor made contact with a Creditor. The Creditor was subsequently held responsible for breaching harassment laws under the Fair Debt Collection Practices Act ("FDCPA").

Under the FDCPA, once a debtor advises a Creditor they have engaged a Lawyer, the Creditor or collection agency must only correspond with the Lawyer appointed by the debtor unless there is prior consent.

In this case, the debtor engaged a Lawyer to represent him regarding his debts. Shortly after the Lawyer was engaged, the debtor made a call to the debt collection agency collecting the debt and asked about the debt and advised the debt collection agency that he had retained a Lawyer concerning this debt. The debt collection agency did not terminate the call at this point, but instead asked why the debtor was engaging a Lawyer, to which the debtor responded he had engaged a Lawyer. A payment plan was attempted by the collection agency before the debtor again stated a Lawyer had been engaged. At this point, the debt collection agency asked for the contact details of the Lawyer.

On these facts the debtor brought an action against the debt collection agency in court for engaging in harassing, abusive and unconscionable conduct.

The agency argued that the actions of the debtor initiating the telephone call amounted to consent to discuss the debt with the debtor.

The Court agreed with the debtor. The fact that the debtor initiated the call was not conclusive that the debtor consented and the agency engaged in prohibited conduct.

One could view the actions of the debtor were a deliberate successful attempt to induce the debt collection agency into breach the FDCPA.

Source: United States District Court Eastern District of Missouri Eastern Division.

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