Being contacted by a debt collector can be stressful. The experience can lead to feelings of guilt, embarrassment, and shame. And it can place your financial future in jeopardy. The good news is, there are laws in Australia that protect consumers from illegal debt practices, and there are many ways that personal debt relief can help you get your financial situation back on track. Knowing what a debt collector can and cannot do can also help make dealing with one easier. Here is how to deal with a debt collector in Australia.
What is a Debt Collector?
A debt collector is an individual who collects overdue, unpaid debt. They may work for themselves, for a debt collection agency, or in-house for a service provider or a lender such as a bank.
The primary goal of a debt collector is to contact the debtor (the person owing the debt), assess their ability to repay the debt, and negotiate with them to work out a debt repayment plan that works best for them. A debt repayment plan may be a single lump sum payment, or a more gradual approach where a portion of the debt is paid off in weekly, fortnightly, or monthly instalments.
As compensation for their services, debt collectors take a percentage of the collected debt from the creditor (the person, company, or organization owed the debt). If they don’t collect, they don’t get paid. Hence, debt collectors have a strong financial incentive to collect unpaid debts; their livelihood depends on it.
What a Debt Collector is Allowed to Do
Debt collectors are subject to strict Commonwealth consumer protection laws. These include the National Consumer Credit Protection Act 2009, the Australian Securities and Investments Commission Act 2001, and the Australian Consumer Law. These protections apply not just to debtors but also anyone a debtor associates with, such as their friends, family, spouse, colleagues, and neighbours.
Under Australian law, debt collectors are allowed to contact debtors via phone, physical letters, email, social media, and face-to-face. They may do so up to three times a week, ten times a month. Unanswered phone calls do not count towards successful contact attempts.
Debt collectors may call debtors on Monday to Friday (7:30am to 9pm) and Weekends (9am to 9pm) but never on National Public Holidays. They may contact debtors via email and social media, but only if they reasonably suspect that neither account is shared and that only the debtor in question will see such messages.
Face-to-face contact is allowed as a last resort if the debtor does not respond to other methods of contact; the debtor may, however, request that the debt collector not visit their workplace, and that they only meet at an agreed time and location.
Debt collectors must treat debtors with respect, fairness, and courtesy in all written and verbal communication. They may contact debtors for the following reasons: to make a demand for payment, to ask why a debt has not been paid, to arrange for repayment, to review a payment plan, and to arrange to inspect and recover mortgaged goods.
What a Debt Collector is Not Allowed to Do
It is unlawful for a debt collector to use abusive language, manipulative tactics, physical force, and harassment. They may not contact a debtor at unreasonable times or more than is allowed. They may not trespass on a debtor’s property, take advantage of their illness, disability, age, illiteracy, or lack of understanding of the law, or talk about their debt to anyone else without their permission.
In Australia, statute of limitations applies to unpaid debts. If a debt is more than six years old, or three years in the Northern Territory, and no action has been taken by a debtor or creditor and no repayment has been made, then the debt cannot be pursued for repayment.
How to Deal With a Debt Collector
Be cooperative
If a debt is legal and reasonable, it is your responsibility to cooperate with the debt collector. You must respond to calls and messages in good time, be honest about your finances and ability to repay, agree to a repayment plan (if you can afford it), and notify the debt collector if your contact details change. Being uncooperative with a debt collector, one who is dealing with you in a professional manner, may result in legal action being taken against you.
Verify details
Of course, you should still confirm that you are dealing with a legitimate debt collector, and that the debt in question is legal and valid.
While most debt collectors will make first contact with a written letter, if you receive a phone call, take the time to verify their details before you act. Gather details about the nature of the debt as well, including the amount, name of the creditor, how old the debt is, and any past payments. Then, contact the debt collector through their official contact details – not those provided by the person you spoke to on the phone – to confirm their authenticity.
Make sure any information you receive about the debt is accurate and valid. For example, if you feel the total amount of the deb is inaccurate, or that one or more past repayments are missing from the record, let the debt collector know in writing and provide supporting evidence to back up your claims. If the debt is valid and due, though, then you’ll need to assess your current finances and ability to repay.
Calculate your budget
Use an online budget calculator to assess the ability to repay. Add up monthly income and expenses separately. Then, subtract the two to see what is left. The leftover money is a good monthly repayment baseline.
When presented with a repayment plan, debt collectors are allowed to request financial details. Share the budget calculator estimates, and other financial documentation, as evidence to support the plan. Only propose a payment plan that is affordable and realistic. In cases of extreme, prolonged financial hardship, where an individual has low income and no major assets, the debt may be waived.
Stick to the repayment plan
Once the repayment plan is established, repay on time, every time, at the correct amount. In the event of financial hardship, notify the debt collector, so they can renegotiate a new repayment plan. If they refuse a new plan, make a complaint.
How to Dispute a Debt or Make a Complaint
If a debt is not legal, reasonable, accurate, or valid, state this in writing. Share evidence as support, too.
Ask the debt collector for a copy of the contract or agreement. This document should show the amount owing, how it was calculated, past payments, and other fees such as principal or interest. Use supporting evidence to refute any inaccurate claims or statements, such as unrecorded repayments.
In the instance of unlawful debt collection behaviour or practices, make a complaint. If a debt collector is trespassing, or threatening violence and physical force, call the police. If a debt collector threatens jail time, this is a false statement and punishable by law.
When to Seek Expert Advice
Dealing with debt collectors can be unpleasant. It can instil fear, anxiety, and uncertainty in people. And for those facing financial hardship, they are especially vulnerable to the emotional impact of debt. Worse still? Debt collectors know this, which is why unethical collectors use high-pressure tactics to scare debtors into complying to their demands. For these reasons, if a debt collector comes knocking, seek expert independent advice.
While it is possible to report debt collector misconduct to the ACC, they do not get involved in individual debt disputes, which can make it hard to get advice that is specific to your circumstances.
This is where a personal debt help, and debt consolidation, service provider can help. By talking to a debt consolidation expert, they can help reduce the amount of owed debt, consolidate multiple debts into one single payment, and take care of the negotiating to save time and hassle. This kind of advice and support is free and confidential. And there is no obligation to accept if the services they offer you don’t fit your needs.
Depending on your financial circumstances, it may be possible to reduce the amount of debt owed, by reducing the amount of interest or fees associated with the debt. It may also be possible to argue financial hardship to eliminate the debt entirely. Consolidation can also help make debt management easier, by combining multiple debts into one fixed weekly, fortnightly, or monthly repayment.
Most importantly? Having someone else to talk to can help ease emotional stress and burden. There is no need to face debt alone. So, having a trusted partner can help make the prospect of overcoming debt easier.
Bottom Line:
Being contacted by a debt collector can be stressful, but Australia has laws in place to protect consumers from illegal debt practice. It’s important to know your rights and what you can and cannot do if a debt collector contacts you.
Key Takeaways:
- Under Australian law, debt collectors are allowed to contact debtors via phone, physical letters, email, social media, and face-to-face
- Debt collectors may contact debtors up to three times a week, ten times a month
- It is unlawful for a debt collector to use abusive language, manipulative tactics, physical force, and harassment.
- If you’re contacted by a debt collector, be cooperative and seek to verify the debt collector and debts are legitimate and valid
- If you’re struggling to pay off debts, contact Debt Fix for a free consultation to see how we may be able to help reduce debt
For more information about personal debt help and debt consolidation, contact Debt Fix for a free consultation.