Consumer Action regularly receives complaints from consumers that are persistently contacted by debt collectors. In our experience, most debtors that contact our services have a genuine desire to repay the debt that is owed. However, some debtors have very little income—social security only—and little other assets beyond household essentials. Some of these debtors are unable to pay back debt without putting their own health and wellbeing at risk.
Victorian legislation and court rules provide important protections for these debtors. While a court may record a judgment, it will not enforce payment of the debt against Centrelink income, and a Sheriff is not able to seize essential household goods. In these circumstances, there is little point in a creditor taking legal action—it’s like throwing good money after bad.
These rules recognise the dangers of old debts being prioritised above essential current expenditure. For example, if a debtor was forced to pay an old telecommunications debt and forgo their rent, there would be significant risks not only for the individual but also for the wider community who may have to step in to provide further support to this person living in poverty. These protections do not invite debtors to not pay their debts; there are still consequences for debtors. For example, not paying a debt can affect your credit report for up to 5 years.
In 2010, new protections were introduced into Victorian fair trading legislation to protect consumers from persistent contact from debt collectors and creditors. The law provides that a debt collector cannot continue to make contact with a debtor after it has received a written request for contact to stop—unless it is to issue legal proceedings or threatening to issue legal proceedings. The new laws also provide that debt collectors can be ordered by the Victorian Civil & Administrative Tribunal to pay up to $10,000 to consumers who experience humiliation or distress as a result of misconduct, in addition to any other remedy available.
Consumer Action believes that people struggling from financial hardship are under enough pressure already and being persistently contacted by a debt collector only makes the situation worse. We’re continuing to highlight the importance of these laws for low-income debtors and would like to hear from consumers who have been contacted by a debt collector despite a request for them to stop.
Please report such cases to our Consumer Advice Line, (03) 9629 6300 or 1800 466 477
Victorians can also access free, confidential and independent financial counseling by calling MoneyHelp on 1800 007 007.