Issues with Debt Collectors

Who are debt collectors?
The term “debt collector” means anyone attempting to collect a debt from you.

A “debt collector” could be any of the following:

• The credit card company
• A debt collection company that has been hired by the credit card company to engage in debt collection on their behalf
• A debt collection company that has bought the debt from the credit card company
• A law firm acting on behalf of any of the above

What rules apply to debt collectors?
In Victoria, there are specific laws that apply to how a debt collector must behave. These laws are in the Australian Consumer Law and Fair Trading Act 2012 (Vic).

There are also rules that are set by the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission (the ACCC/ASIC Debt Collection Guideline). These rules apply to businesses collecting debts across Australia.

Misleading and deceptive conduct
Debt collectors are not allowed to mislead or deceive you under section 18 of the Australian Consumer Law.

A debt collector must not give misleading information to you about:

• How much you owe.
• How much time you have to pay.
• What happens if you don’t pay. For example, telling you that you will be charged by the police if you don’t pay.  Another example is telling you that your car or house will be taken if you don’t pay when the debt collector do not have a mortgage or a court order.
• The legal consequences if you don’t pay. For example, asking you to pay a statute barred debt. A statute barred debt is one that you do not have to pay because it is too old. See here for an explanation about statute barred debts.
• Who they work for. For example, saying that they work for the Government or are a lawyer, when this is not true.
• Your ability to request payment plans. For example, telling you that you have to make a lump sum payment in order to enter a payment plan, or saying that they cannot enter a hardship arrangement when they can.

The debt collector must also not:

• Use false or misleading documents (for example, fake Court document)
• Tell you they will apply to Court, if this is not true.
• Keep contacting you after you dispute the debt.

Harassment and coercion

Debt collectors are not allowed to:

• Shout, insult or swear at you.
• Tell your family, friends or workplace about the debt.
• Threaten to tell your family, friends or workplace about the debt.
  Demand anyone else pay your debt.
  Publish information that you owe the debt (for example, on social media).
  Pressure you to borrow money from a friend or family member to pay the debt.

Unreasonable conduct
There are rules about how and when a debt collector can contact you about a debt.

Debt collectors must not:

• Contact you by a method you have asked not to be contacted by.
• Contact you outside the hours:
  • Mon-Fri: 7.30 am – 9 pm
  • Sat/Sun: 9 am- 9 pm
  • On a public holiday
• Contact you unreasonably often. This means that they must not call you and speak to you on the phone, or leave a voicemail, more that 3 times per week, or 10 times per month.
• Contact you directly if you have asked that they contact your representative (for example, if you have asked them to contact your financial counsellor).
• Contact you while there is a payment arrangement in place, and you are making the required payments.
• Contact you after you have sent them a letter saying not to contact you further unless they are intending to start Court proceedings.

What can I do if the debt collector breaks these rules?
You can use the credit card debt assistance tool (below) to write a letter to the debt collector describing how they have breached these rules, asking them to stop doing this and asking for compensation.

In our experience, about $500 per breach of the rules is a realistic amount to ask for in compensation. If you have evidence of how the debt collector affected you (for example, a letter from a support worker or doctor) then this could assist your claim.

What if the debt collector refuses to pay compensation?
You could make a complaint to a dispute resolution body. There are different dispute resolution bodies for different types of debts:

• For loans, you can apply to the Australian Financial Complaints Authority (AFCA).
• For electricity, gas and water debts, you can to the Energy and Water Ombudsman Victoria (EWOV).
• For phone and internet debts, you can apply to the Telecommunications Industry Ombudsman (TIO).

There are limits on the amount of compensation a dispute resolution body can order for stress and inconvenience. For example, AFCA are only able to award up to $5400. The TIO can award up to $1500.

Another option is to make a complaint to the Victorian Civil and Administrative Tribunal for breach of the Australian Consumer Law and Fair Trading Act 2012 (Vic). You can seek up to $10 000 in compensation if these rules have been breached and you have experienced humiliation or distress. Please note that this is the maximum amount that VCAT can order and does not necessarily mean that you will be able to obtain $10 000 compensation. How much compensation VCAT thinks that you should be paid will depend on how serious the breaches of the debt collection laws were, how many breaches there were and how much this has impacted you.

If you are intending to make a claim to VCAT, you should also seek advice about the debt that the debt collector alleges that you owe. This is because they may put in a claim against you seeking payment of the debt. Therefore, it is important to know if you have any defenses to the debt, and how much a claim for compensation might reduce the debt.