Regulators investigate debt collection industry

3D Shackled Debt

The Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) are so concerned about the dodgy practices of debt collectors the regulators have launched an investigation into how the industry works.

The ACCC said it intended to examine how the industry operated, “in particular, the business models adapted in the industry and the influence this may have on activities that take place when collecting debts from consumers”. The Commission is expected to report its research findings in mid-2015.

The debt collection and receivables markets are regarded as an important indicator of overall consumer and business financial health as spikes in collection actions can indicate the emergence of financial stress among both consumers and merchants.

However the quality of debt sent through to collection agencies has also sometimes raised concerns, especially in the telecommunications sector where bans on selling ‘disputed debt’ — or bills that a customer contests as invalid or wrong — have been imposed by regulators concerned about the legitimacy of some billing practices.

An ACCC spokesperson said that although there had not been a significant spike in the number of complaints about debt collection activities, the Commission continued to receive complaints from debtors.

“It is of concern to the ACCC that one-third of complaints relate to allegations of harassment and coercion by collectors and creditors and the next type of most prominent complaint is about misleading and deceptive conduct,” the spokesperson said.

Now, with Christmas just around the corner, the ACCC and ASIC have just launched a guide for people in trouble with debt about how to deal with debt collectors and creditors. The very fact the two regulators feel the need to spell out the rules of engagement indicates that there is clear room for improvement.

The guide, ‘Dealing With Debt Collectors’, includes advice on what sort of behaviour by debt collectors is unacceptable, what to do if a debt collector contacts you, managing repayments, disputing a debt and people’s rights and responsibilities if they owe money.

For example, debt collectors cannot use or threaten physical force, shout or verbally abuse you or stay on your property after you have asked them to leave, unless they have a court order.

Debt collectors are also forbidden to loiter near your house, embarrass or distress you in front of somebody else or tell other people  about your debt – including your children – or make false statements about what will happen in the debt isn’t paid or what they intend to do (e.g. repossess your car).

ACCC Deputy Chair Delia Rickard said that the Commission and ASIC continued to receive complaints about the behaviour of some debt collectors and creditors.

“It is important for consumers to be aware of their rights when dealing with debt collectors and to know how to complain,” Ms Rickard said.

“Where creditors or collectors disregard consumer protection laws and the rights of consumers, we will consider appropriate enforcement action against them.”

Debt collection clearly represents a growing headache for the Commission. In July this year it published revised guidelines for creditors and debt collectors on how to behave when they pursued people to pay up.

There have been several high profile cases of debt collection companies or creditors behaving badly over the past few years.

One of the worst involved a telco, Excite Mobile Pty Ltd, whose outrageous behaviour included telling people living in remote indigenous communities that a mobile service was available in their homes when it wasn’t; threatening to repossess all of a debtor’s assets, including their children’s toys; and setting up a fictional independent complaints handling organisation and a fake debt collector to coerce people into paying their debts. The company was slugged $455,000 and its directors disqualified.

Another landmark case brought by ASIC against debt collector Accounts  Control Management Services in 2012 found that the company falsely threatened people with imminent legal action and encouraged collection officers to warn debtors that they would be served court documents by sheriff’s officers and encouraged collection officers and ordered them to ‘stress that they are dressed like police officers and arrive in a marked car’.

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