Debt recovery: 8 tips for dealing with debt collectors
Just about anyone can run into trouble with debt. DG Institute Founder Dominique Grubisa explains that should your finances take a turn for the worse, there are guidelines governing the behaviour of debt collectors. Being aware of those rules can make your debt recovery process less stressful.
Rules debt collectors must follow?
- There are strict limits on their behaviour
- They can’t harass you with phone calls
- They can’t harass you in person
- They need to provide you with documentation
- They have to negotiate to help you with debt recovery
- They can’t offer bad advice on debt recovery
- They cannot misrepresent the situation
- There’s a time for them to desist
Falling into serious debt is one of the most painful and humbling experiences an individual can go through.
Suddenly, the very assets you depend on to live and do your job – your house, your car, your furnishings – may be at risk of being taken away from you. Your sense of self worth takes a major dive, as does your feeling of security and independence. While circumstances well beyond your control may have played a major role in you falling on hard times, other people are sure to judge and blame you.
And one of the most uncomfortable new additions to your life are debt collectors. Their job is to recover from you the money you owe your creditors and they can be incredibly persistent. Some major lending institutions have their own in-house debt collectors, but in most cases the job is outsourced to third-party companies who specialise in recovering debt.
Your creditors are legally entitled to monies they are legitimately owed, and you are obliged to communicate with them and to be candid about your finances. But you don’t need to accept bad behaviour on their part. Two regulatory bodies, the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investment Commission (ASIC) have guidelines in place covering the conduct of debt collectors. While the guidelines are not directly legally enforceable, they are often backed up by underlying consumer protection legislation and can be cited in court cases.
Rules debt collectors must follow
1. There are strict limits on their behaviour
A debt collector may only make contact with a purpose and that cannot be to intimidate you. They can’t harass, threaten, embarrass or try to ‘tire out’ a debtor. They cannot abuse you, nor use demeaning language, force or coercion. If they breach these guidelines, let them know them that you intend to contact the ACCC and/or Fair Trading if they persist.
If their conduct goes even further and is menacing, go to the police for an Apprehended Violence Order (or the equivalent in your state). If the police won’t help, try your local court and ask the registrar or court staff to assist in taking out an AVO.
2. They can’t harass you with phone calls
The guidelines suggest that polite, professional and necessary contact (written or verbal; phone calls, messages, emails, text messages and letters) of up to three times per week or 10 times per month is the limit. Calls or other contacts made outside of work hours or in rapid succession (even where messages are left) could be “undue harassment”. Debt collectors must respect the communications option you approve, within reason.
3. They can’t harass you in person
A debt collector is permitted one face-to-face contact with you per month and this considered “a last resort”; if they confront you at work, they must not make any details regarding your debt known to others in any way. They are only allowed to visit your home if necessary (i.e. to repossess something). If you ask them to leave, they must comply immediately. They cannot place you under surveillance. If you nominate a representative and provide details, the debt collector must only deal with them, unless they are unable to respond or act.
Debt collectors are only allowed to approach third parties (i.e. family or friends) once every six months and only to contact you. They are not allowed to discuss any details of the debt, or even the fact that you owe a debt, with anyone other than you without your express permission.
4. They need to provide you with documentation
They must provide documentary evidence you ask for in relation to your debt, i.e. the breakdown of interest or the default charges. If they refuse, then it could be construed as misleading and deceptive conduct. Put your request in writing and document all conversations in case you decide to make a complaint.
5. They have to negotiate to help you with debt recovery
A debt collector must not refuse hardship arrangements nor refuse to effective debt recovery strategies – if they do, it is considered misleading and deceptive conduct. Most lenders/creditors are legally obliged to entertain a variation of your loan contract in circumstances of hardship.
6. They can’t offer bad advice on debt recovery
It is unacceptable for a debt collector to encourage a debtor to get into more debt to service their liability. If a debt collector suggests getting a credit card or refinancing your home to pay your debt, take notes and make a complaint to the ACCC or Fair Trading.
7. They cannot misrepresent the situation
A debt collector cannot deceive you or advise you incorrectly, i.e. “Because this is an investment property you cannot vary your loan contract” or “If you don’t pay by Friday we will take your house next week.”
8. There’s a time for them to desist
They should desist once enforcement proceedings have commenced. If your matter is before the courts and the debt collector is still making unnecessary contact, you should report the matter to Fair Trading. If you have a working repayment agreement with your lender, its debt collectors cannot contact you. Similarly, if you become bankrupt debt collectors are obliged to cease contacting you.
So, stand tall, know your rights and don’t let the debt collectors intimidate you. Negotiating with creditors or debt collectors can make your debt recovery path a lot easier and less stressful.
Lawyer, Asset Protection Specialist and Property Educator
Dominique Grubisa is a practicing legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at email@example.com
This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.