CDE07- Debt Collectors: Know Your Rights
Have you been contacted by a debt collector?
This toolkit will help you understand your rights and legal options if you are contacted by a debt collector. It explains
- what a debt collector is not allowed to do
- how you can stop a debt collector that is not complying with the law
- how and where to complain about a debt collector
- When you might claim compensation from a debt collector for breaking the law
The toolkit will assist you to draft any letters you might need to help resolve these issues.
What is a Debt Collector
A debt collector is a person or company that collects debts, or bills that might be overdue. The person, company or organisation you owe money to is called a creditor. The creditor might contact you about paying the money owed or get a debt collector to contact you about paying the money owed.
It is important that you do not ignore contact from a debt collector, because this might lead to further fees and charges.
Laws about Debt Collectors
Victoria has laws about how a debt collector can behave and what they are not allowed to do.
These laws apply to any business trying to collect money from you.
Sometimes debt collectors might try and contact you, or do things to put pressure on you that are in breach of these laws. This toolkit will explain what a debt collector is not allowed to do, how you can respond, including drafting a letter for you, and how to complain about the debt collector.
There is also a Debt Collection Guideline, (click here) jointly published by the ACCC and ASIC which has a lot more detailed information.
What if I believe I don’t owe the money
If you are being asked to pay a debt you think you do not owe it is important you clearly tell the debt collector and the creditor that you dispute the debt. If the creditor is using a debt collection business the debt collector might not know anything about why you owe money, and you will need to contact the creditor.
A debt collector is not allowed to:
- Mislead you about anything to do with the debt
- Mislead you about what might happen if you don’t pay the debt
- Harass you or anyone else to pay the debt
- Contact you in an unreasonable way
More detailed examples about what each of these mean is provided in further detail below.
If a debt collector is doing the wrong thing
If a debt collector is in breach of what the law allows them to do, you might be able to request compensation. You might also be able to make a complaint to make the debt collector stop contacting you.
This tool will help you lodge a compensation claim or draft a complaint letter if the debt collector has breached those laws.
Is a debt collector being misleading or deceptive
Debt collectors are not allowed to mislead or deceive you under section 18 of the Australian Consumer Law.
A debt collector must not mislead 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, or Telling you that your car, house or other property will be taken or sold when they do not have a legal authority (such as a mortgage or 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.
- The option to request a payment plan
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
Is a debt collector harassing you
Debt collectors are not allowed to:
- Shout, insult or swear at you
- Tell your family, friends or workplace about a debt
- Threaten to tell your family, friends or workplace about the debt
- Demand that someone else must pay your debt
- Make it public 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
Is a Debt Collector making unreasonable contact with you
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 this tool 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 formal complaint about the debt collector. There are different processes 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 complain 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 you can get for stress and inconvenience. For example, AFCA can only award a maximum of $5400, and the TIO a maximum of $1500.
You can also 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 mean you will obtain $10 000 compensation for a breach. How much compensation VCAT thinks you should be paid, (and it could be zero) will depend on:
- how serious were the breaches
- how many of the laws have been breached
- how many times the breaches occurred
- the impact the debt collectors conduct has had on you.
It is also important to be aware that if you make a claim to VCAT for compensation, it is likely the debt collector will make a claim against you for payment of any outstanding debt.