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."

Misleading Debt Collection Tactics in New Zealand

Friday, December 28, 2018 - Posted by Michael McCulloch

stuff.co.nz is reporting that the New Zealand Commerce Commission has warned a debt collection agency for possibly breaching the Fair Trading Act.

The warning comes following a complaint by a consumer that if she wanted to dispute a debt that she should raise the dispute with them but pay the debt to them in the meantime.

A spokeperson for the Commerce Commission said in a statement that the debt collection agency was incorrect in this advice as the debt collection agency had in fact purchased the debt and that the dispute should be handled by them. The Commission went on to say that it has also warned the debt collection agency to take care in the future to avoid making statements to debtors which may give the impression that Court action was inevitable if the debtor did not make immediate payment.

Commissioner, Anna Rawlings, said, "While debt collectors often need to discuss the nature of a debt and the consequences of non-payment with a debtor, they must not use misleading techniques to pressure debtors into paying or to deter them from pursuing genuine disputes. This includes saying that a debtor cannot dispute a debt, telling them that court action will commence within a certain timeframe when it may not or giving the impression that certain outcomes are inevitable if they are not."

While there may be differences in the legislation surrounding debt collection practices in New Zealand and Australia this article should serve as a timely reminder of your obligations under the Debt Collection Guidelines: for Collectors and Creditors with a specific focus on s13 of the Guidelines regarding disputed liability and s19 of the Guidelines regarding Representations about the consequences of non-payment.

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

Victoria Plans Crackdown on Debt Collection Industry

Monday, July 30, 2018 - Posted by Michael McCulloch

The Labor party in Victoria has planned a crackdown on debt collection in Victoria if re-elected at the November State election.

news.com.au and radio 3AW 693 are reporting that organised crime groups will be the focus of a planned State Government crackdown on the debt collection industry with Police Minister, Lisa Neville, announcing earlier this month an overhaul of the regulations. In a statement to the media she said, "We'll clean up this industry, like we did with scrap metal - to tackle organised crime and crack down on rogue operators."

The Labor Government, if re-elected, would like to establish a dedicated commission and harsher penalties for those involved in unlicensed debt debt collection in Victoria and would work more closely with the police, Consumer Affairs Victoria and industry leaders to clean-up the industry.

Chief Executive of the Australian Collectors and Debt Buyers, Alan Harriers, said in response, "If they are that [sic] then it's up to Fair Trading to stop them as being illegal persons doing debt collection. I am unaware of any prosecutions against people in this regard. If they were actual proper debt buyers, they would hold an Australian credit licence that is issued by ASIC. It's a very highly regulated industry."

In Victoria there is not a legal requirement in which to hold a debt collection licence.

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

Recovering Debt Collection Costs

Tuesday, February 27, 2018 - Posted by Michael McCulloch

A water utility supplier in Queensland brings to the light the issue of attempting to recover debt collection charges from customers.

Queensland Urban Utilities have recently come under regulatory scrutiny after they were found to be charging a debt collection fee on their overdue debts. It is reported in the Courier Mail that they are currently clarifying their legal position but in the meantime will reimburse or fogive $180,000 in debt collection fees.

The Queensland Debt Collectors (Field Agents and Collection Agents) Act 2014 forbids the collection of debt collection costs -

s27 Recovery of Costs of Debt Collector
(1) A person must not recover or attempt to recover from a debtor the costs or expenses of a debt collector for performing a debt collection activity or a repossession activity.

(2) Subsection (1) does not apply to prevent a person who appoints a debt collector to repossess goods or chattels from a debtor from recovering the debt collector’s costs and expenses if the person has a right under an agreement with the debtor or otherwise to recover the costs or expenses.

(3) Costs or expenses recovered in contravention of this section may be recovered by the debtor as a debt.

(4) This section applies subject to the National Credit Code in schedule 1 of the National Consumer Credit Protection Act 2009 (Cwlth) .

(5) In this section— 
"costs" do not include—
(a) stamp duty; or
(b) legal costs fixed by, or payable under, rules of court or a court order.
"debtor" includes a person from whom goods or chattels may be lawfully repossessed.

Similar legislation applies in New South Wales and Victoria under the NSW Commercial Agents and Private Inquiry Agents Act 2004 and Australian Consumer Law and Fair Trading Act 2012:


NSW Commercial Agents and Private Inquiry Agents Act 2004
s19 Licensee Not to Charge Debtor for Expenses of Debt Collecting

(1) A licensee must not request, demand or collect from a person (the "debtor" ) any payment for the costs or expenses incurred by the licensee in connection with the collection from that person of money due under a debt.

(2) Any money received from the debtor by a licensee in contravention of subsection (1) may be recovered by the debtor from the licensee, as a debt, in any court of competent jurisdiction.

(3) This section does not limit any right that the person to whom the debt is payable (the "creditor" ) may have at law with respect to the recovery from the debtor of the creditor's costs in recovering the debt.

Australian Consumer Law and Fair Trading Act 2012
s52 Offence to Charge Debtor for Cost of Debt Collection

(1) A debt collector must not recover, or attempt to recover, from a debtor any remuneration or payment in connection with the collection of a debt including the costs and expenses of a debt collector for—
(a) finding or attempting to find goods or chattels of the debtor;
(b) repossessing or attempting to repossess goods or chattels from the debtor;
(c) collecting or attempting to collect a debt owed by the debtor.

(2) Subsection (1) does not apply in respect of a debt collector who is recovering or attempting to recover on behalf of a creditor enforcement expenses reasonably incurred by that creditor—
(a) if a credit contract allows the recovery of those expenses; or
Note
See section 107 of the National Credit Code.
(b) in the case of a debt that was not wholly or predominately accrued in connection with personal, domestic or household purposes, if a term of an agreement between the creditor and the debtor permits the recovery of those expenses.

(3) It is a defence for an offence against subsection (1) that the debt collector had an honest and reasonable belief that the enforcement expenses that he or she was recovering or attempting to recover did not exceed those reasonably incurred by the creditor.

(4) Any costs or expenses recovered in contravention of subsection (1)—
(a) may be recovered by the debtor as a debt; and
(b) if the debt collector is the creditor—
(i) may be set off against the debt; or
(ii) may be recovered by the debtor from the debt collector or the creditor.

(5) In this section—
"costs" do not include—
(a) stamp duty; or
(b) legal costs fixed by, or payable under, rules of court or a court order;
credit contract has the meaning given by section 4 of the National Credit Code;

"creditor" includes a partner, employer, employee, principal or agent of the creditor or a person who is in any way acting in collusion with the creditor;
"debt collector" means a person who engages in debt collection—
(a) as a principal or agent;
(b) as an employee of a principal or agent in exchange for salary, wages or commission;
"debtor" includes a person from whom goods or chattels may be lawfully repossessed.

For further reading we refer you to ACCC v Sampson [2011] FCA 1165.

The ACCC has previously written to agencies and Solicitors who act in the debt collection industry reminding them:

1. If something is only a possible consequence of not paying a debt, you must ensure that you do not create an impression that it is a definite consequence
2. Before asserting the right to payment of administrative and or legal costs you must ensure that you are aware of whether or not there is a legal entitlement to claim any such costs
3. You cannot create an impression that a debt collection letter, demand or notice are documents which have been authorised by a Court or able to be filed with a Court.

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

Dealing With Authorised Representatives

Thursday, March 23, 2017 - Posted by Michael McCulloch

It is common in the debt collection industry a debtor to elect to authorise a 3rd party to act on their behalf.

Regulatory Guide RG96 Debt Collection Guidelines give the right to the debtor to authorise a 3rd party to represent them or advocate on their behalf about the debt.

What happens however when this 3rd party does not consent, won't respond or does not have instructions from the debtor?

RG96 is very specific about when you are entitled to contact a debtor which we have supplied as an extract below:

(d) You are entitled to contact a debtor directly if:
- The debtor specifically requests direct communication with you
- The representative does not consent to represent the debtor in relation to the debt
- The representative advises you that they do not have instructions to represent the debtor in relation to the debt
- The representative does not respond to your communications within a reasonable time (normally seven days) and you advise the representative in writing after the reasonable time has passed that if they do not respond within the next seven days, you will make direct contact with the debtor
- You advised the debtor that you require a written authority which states that you are only to communicate through the debtor’s representative, and the debtor or representative fails to provide you with that written authority within a reasonable time (normally seven days). Note that this does not apply where the debtor’s representative is a solicitor. When an authorised representative does not agree to have written correspondence redirected to the representative, such correspondence should continue to be sent directly to the debtor. 

Other instances where contact can be made with a debtor directly where they have previously authorised a 3rd party include:

- The representative is acting in a manner or making decisions which increase or are likely to increase the debtor’s liabilities
- The representative may be charging the debtor a fee for services that can be readily accessed free of charge
- The representative may be receiving payment from the debtor for the negotiation of a debt settlement
- You reasonably believe that the representative is not informing the debtor of all available options, offers of settlement, offers of hardship assistance or other creditor proposals
- You reasonably believe that the representative is engaging in a deceptive or misleading manner in engagement with either or both the creditor or the debtor
- You reasonably believe that the debtor has not been informed of the potential risks and
 consequences of a course of action the representative is pursuing
- You reasonably believe that the representative is acting against the debtor’s best interests.

It is our recommendation that where you have elected to discontinue contact with an authorised 3rd party that not only is your intention confirmed to the 3rd party in writing, and a minimum 7 days allowed for a response, that when contact is made with the debtor that you clearly indicate as to why you are no longer communicating with their representative and ensure that any correspondence is documented for future reference.

Source: Regulatory Guide RG96 Debt Collection Guideline

Note: Please note that this article does not constitute legal advice. If in doubt you should seek your own proper, independent legal advice.

Debt Collection and the Statute of Limitations

Wednesday, November 23, 2016 - Posted by Michael McCulloch

It has been some time since we looked at the impact of the Statute of Limitations in debt collection so we thought that an update might be worthwhile as a refresher not only for our long-term subscribers but also those that have recently subscribed to this blog and our newsletter.

What Are Statute Barred Debts?

Statute Barred debts are debts to which the appropriate limitation period has expired for the debt to be collected. Across each State and Territory of Australia the limitation period varies from 3 years to 15 years.

The table below summarises the limitation period for each State and Territory:

It should be noted that in the table above that the limitation periods stated only apply to unsecured personal loans and credit cards (overdrafts, line of credits, etc). These are typically referred to as "simple contracts" and Court Judgments.

When Does the Limitation Period Start?

The limitation period starts from what is referred to as a "right of action". While not particularly straightforward a right of action can be interpreted as when a debt becomes due, either because a contractual repayment is required, or because an instalment that fell due is defaulted on as set out in the contract.

Can The Limitation Period Be Extended?

The limitation period can be extended when payment is received or the customer acknowledges the debt. There are other circumstances that may extend the limitation period, specifically relating to a Judgment Debt, however you should seek your own independent legal advice concerning this.

How Is A Debt Acknowledged?

The legislation surrounding the limitation period is very specific in relation to what must occur for the debt to be acknowledged. The acknowledgement must:

• Be made by the customer or an authorised person acting for and on behalf of the customer;
• Be in writing and signed; and
• Constitute a clear knowledge that the debt exists and remains unpaid.

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