Debt collection practices improving but still a long way to go

The debt collection sector remains an irritant in the eyes of financial regulators. A report released last week by the Australian Competition and Consumer Commission found that "there have been improvements in debt collection practices across Australia but that problem areas remain."

Many of the complaints it heard about debt collectors related to "excessive, harassing and coercive behaviour," said the ACCC. It said some credit providers used multiple collection services to pursue outstanding debt (the so-called "tiered collection strategy").

Other complaints concerned poor management of debtors in financial hardship.

The ACCC found that some debt collectors or solicitors imposed additional fees and charges on outstanding debts, which exacerbated problems consumers had making payments.

According to the report, the industry includes more than 500 businesses offering some form of debt collection service. Total industry revenue is around A$1.2 billion a year.

The report is studded with case studies of adverse conduct by debt collectors, and includes detailed guidelines on appropriate times to call, the frequency of calling and restrictions on contact with family members.

The report also cited widespread concerns about the practices of credit repair businesses. "While not considered part of the debt collection industry these businesses can charge consumers large fees."

Where improvements have occurred, this is largely due to the use of technology that has increased internal oversight and compliance. Digitisation allows for call recording and improved record keeping.

"Large businesses have automated systems and procedures that ensure compliance with provisions relating to the timing, frequency and appropriateness of contacts," the report said.

The ACCC said it would take action against debt collectors who break the law.

The ACCC and the Australian Securities and Investments Commission have issued new debt collection guidelines last year, in which they said a creditor may be responsible for their agent's collection activities, even if the agent acts in a way that is contrary to an agreement or understanding between the creditor and agent about how the collection is to be undertaken.