Most people who get caught up in a personal debt collection situation haven’t planned for it. Whether it’s an unpaid bill from a tradesperson, a dispute over rental arrears, a personal loan, or money owed to a local business, that initial contact from a debt collector can be downright intimidating. Strip away the anxiety however, and what you’re left with is a fairly straightforward process that’s governed by clear rules, with each side having its own defined rights.
The Reach of Personal Debt in Australia
Personal debt in Australia covers a whole range of situations: credit cards, personal loans, buy now pay later debt, utility bills and arrears on rent, as well as debt owed to individual service providers. The Reserve Bank of Australia keeps a close eye on household debt as a proportion of disposable income, and unfortunately that means Australia consistently ranks among the highest in the world on that measure. This context is important because it means that engaging a personal debt collection agency is not an unusual occurrence in Australian financial life; tens of thousands of accounts get passed through the recovery process every year, ranging from a few hundred dollars to much larger amounts.
The types of debts that get referred to collection agencies vary quite a bit from corporate debts. They come in different sizes, are documented to different standards and have different options for pursuing recovery. A debt on a credit card and an unpaid bill from a local business are both personal debts, but they typically travel through different channels and carry different obligations.
Who Can Refer a Debt for Recovery?
Anyone, a small business, a landlord, a doctor, a sole trader or just an individual who is owed money, can hire a licensed collection agency to help chase down a legitimate and undisputed debt. The key is that the debt needs to be genuine and not being disputed. If a debtor is challenging the legitimacy or size of what is owed, the recovery process is going to look a lot different from the beginning. Collection agencies aren’t arbitrators; their job kicks in when the debt is established and the dispute is about paying it, not about whether it exists.
The age of the debt, the quality of the documentation, and whether or not you have the debtor’s up-to-date contact details all play a part in determining whether or not recovery is likely to be worth pursuing. A clear signed agreement and recent communication history make for a very different situation from an informal arrangement with someone who’s now long gone.
What Collectors Can and Cannot Do?
The joint ACCC and ASIC Debt Collection Guideline sets out rules governing collector conduct in Australia. They are clear. Collectors cannot communicate outside the hours deemed acceptable, they cannot make any false or misleading statements regarding the debt and its enforceability and they cannot engage in any form of conduct that can be construed as harassment and/or coercion. These are binding rules, not guidelines. Agencies found not complying with them face strict regulatory penalties.
At all times during the process, debtors have certain rights:
- Right to request all communications to take place via a lawyer or a dispute resolution body.
- Right to dispute the debt in writing and have the objection reviewed properly before proceeding with recovery.
- Right to put forward a payment proposal, which any responsible agency must consider.
- Protections from contacting the debtor in such a way as to cause distress or embarrassment and not educate.
ASIC licenses the credit activity players, including those collecting in the consumer credit sphere. Checking whether an agency has the proper licence before employing it or being contacted by one takes a couple of minutes but may well be worthwhile.
Why Debtors Who Make Contact First Are in a Better Position?
Perhaps one of the most commonly misunderstood facets of the personal debt collection process is this: debtors initiating the contract and making a viable offer are in a significantly stronger position than those opting out. Initiation means escalation to the process. Debtors admitting to their debts and making an offer give both parties an opportunity to do things in a cost-effective manner, minimising the stress and legal fees required.
A documented payment plan and an informal agreement over the phone bear a completely different meaning. A payment plan in writing, detailing how much money is supposed to be paid and when, makes it possible for the debtor to be protected if the question of what was discussed ever comes up in the future. For anyone having trouble, hardship variation is a legitimate tool in the process. Using it early instead of after default is likely to produce better results for everybody concerned.
When Does Recovery Move Toward Tribunal or Court?
Personal consumer debt recovery for small amounts typically requires going through the state-based consumer tribunal before turning to courts. Tribunals are meant to be accessible without lawyers; that’s why they exist. A decision taken by a tribunal has full enforceability, including garnishing wages and going after the debtor’s assets; that’s the reason the voluntary solution is preferred when available.
The limitation period for personal consumer debt differs depending on the state and the type of debt. A personal debt does not become legally uncollectible just because it seems outdated. Debtors assuming that time will take care of it themselves often come up short when faced with the demand many years after the payment deadline expires. Seeking particular legal advice about limitation periods, considering the state and debt types is definitely more reliable.
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