Debt collection is a necessary business activity where creditors and collectors are able to take reasonable steps to secure payment from customers who are legally bound to pay or to repay money they owe.

Businesses that want to continue to work for current debtors should treat them fairly, with respect and courtesy. You should never harass or coerce them, treat them unconscionably or mislead them as to the nature of their debt, their legal obligations or any possible outcomes if the debt is not paid. You should also not pursue a person for a debt unless you have reasonable grounds for believing the person is liable for the debt.

Communications with the debtor must always be for a reasonable purpose and should only occur to the extent necessary. It may be necessary and reasonable for you to contact a debtor to:

• give information about the debtor’s account;
• convey a demand for payment;
• accurately explain the consequences of non-payment, including any legal remedies available to the collector/creditor, and any goods/service restrictions that may apply;
• make arrangements for repayment of a debt;
• put a settlement proposal or alternative payment arrangement to the debtor;
• review existing arrangements after an agreed period;
• ascertain why earlier attempts to contact the debtor have not been responded to within a reasonable period, if this is the case;
• ascertain why an agreed repayment arrangement has not been complied with, if this is the case;
• investigate whether the debtor has changed their location without informing you, when there are grounds for believing this has occurred; and
• sight, inspect or recover a security interest.

However, it is not reasonable or acceptable to contact a debtor to:

• frighten or intimidate the debtor;
• demoralise or exhaust the debtor; or
• embarrass the debtor in front of other people.

The Australian Consumer Law, contains 3 general prohibitions that may be relevant to debt collection activity:

Prohibition of the use of physical force, undue harassment and coercion to support a demand for payment for goods or services/financial services is deemed unacceptable and is prohibited. These provisions are not limited to conduct directed at a debtor. They also apply to the collector’s conduct towards a third party (for instance, a family member);

Prohibition of misleading and deceptive conduct.Collectors are prohibited from making any statement or engaging in any other conduct (for example, impersonating someone, or using a false letterhead or document) that is misleading or deceptive or is likely to mislead or deceive. Collectors may breach this prohibition even though they do not intend to mislead - it is enough that the misrepresentation is likely to have this effect on the type or class of person to whom the conduct is directed. In some circumstances, a collector may need to positively disclose information to avoid creating a misleading impression; and

Prohibition of unconscionable conduct.Collectors risk breaching this prohibition particularly when they exert undue influence or pressure on, or unfair tactics against, a debtor who is specially disadvantaged or vulnerable.

If you require assistance in recovering money that is due to you, or you have received a demand from a creditor or a collection agency, we can provide you with advice that is specific to your situation.

Call one of our Commercial Lawyers for free initial telephone advice on your circumstances on (02) 9525 8688.