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The Dark Side of Credit

Section 60 of The Trade Practices Act specifically prohibits the use of physical force, undue harassment or coercion by a company, its staff or agents in seeking to collect debts.

In the most extreme cases, it provides for fines of up to $1.1 million against companies and $220,000 against individuals if they are found by the courts to have harassed debtors.

As the administrator of the Act, the Australian Competition and Consumer Commission (ACCC) receives hundreds of complaints – between January and November last year it received 770 complaints and 78 inquiries about a potential breach of s.60.

The main complaints were about disputed debts.

The next-highest category of calls related to harassment.

The degree of harassment suffered varied immensely, with some callers complaining about a few phone calls a week while another reported having received between 40 and 80 a day over a period.

While some callers spoke only of frustrating levels of contact, many claimed to have been abused and frightened by the conduct of a debt collector.

Consumers recounted stories of debt collectors threatening their physical safety as well as their property, reputation, business and in some cases their family.

Contacts also raised concerns about debt collection staff who were contacting them at inappropriate times or venues – such as work – and causing stress.

Some complainants said the harassment persisted even though the debtor was ill, disabled or frail.

The ACCC and the Australian Securities and Investments Commission (ASIC) have produced a free publication, The Debt Collection Guideline, which is available online. The ACCC advises:

A debt collector should only contact a consumer if it is for a reasonable purpose and this should only occur to the extent necessary.

Contact should be made within reasonable hours only and limited to about three times a week per account being collected.

Face-to-face visits with the debtor should be limited to where other, less intrusive, contact methods fail. If the debtor refuses the visit the debt collector must not enter their premises.

Debt collectors should not do anything that intimidates, embarrasses, exhausts, demoralises or frightens the consumer or anyone they know, such as a family member or neighbour.

No private information can be disclosed to a third party by a debt collector unless they have the debtor's permission. A debt collector must verify the identity of the person with whom they are speaking before continuing any discussion about the debt.

Once the debt collector has established that the consumer is the right person, they should identify themselves and their employer as well as provide information about the debt.

If the person contacted in relation to a debt disputes their liability, the debt collector should cease activities while they investigate the matter.

It is misleading for a debt collector to state or imply that the debtor must prove they are not liable for the debt. In legal proceedings, proof of the debt lies with the person alleging the debt is owed to them.

It is a good idea to provide the debt collector with a formal, written denial of liability if the consumer feels that the debt has been wrongfully attributed to them. However it is not acceptable for the debt collector to demand this before investigating a disputed debt.

Once an agreement has been reached over a payment plan, the debt collector should only contact the debtor where it is reasonable – that is, when the debtor has not been making payments, to suggest a genuine alternative payment method, or when they have been asked by the debtor to make contact.

Most creditors and debt collectors should have an internal dispute-resolution option available to consumers or belong to an independent external dispute-resolution scheme.

Consumers are also able to seek private legal advice where they are unsure of their rights in relation to a debt collector.

Any potential breaches of the TPA provisions against harassment and coercion should be reported to the ACCC or, if in relation to a financial service, the Australian Securities and Investments Commission.

Information about your rights and responsibilities when dealing with debt is available at accc.gov.au/debtcollection. The ACCC pamphlet, Dealing with debt: Your rights and responsibilities, is available free by calling 1300 302 502.

Graeme Samuel is chairman of the Australian Competition and Consumer Commission.

Causes for complaint

Over the past few years, the main complaints have been about disputed debts. These mostly involved a consumer who:

Felt that the debt had already been paid;

Could not remember incurring the debt;

Believed that the amount of the debt was incorrect;

Was frustrated about being pursued for a debt they had not heard about for many years and was often for a small amount.
SOURCE:  Sydney Morning Herald

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