Lenders unable to wholly sell debt

Lenders retain responsibilities to debtors even after they have sold on the debt to a collector, according the chairman of the Australian Competition and Consumer Commission, Graeme Samuels.

"The ACCC recognises the responsibilities of original creditors in addition to third-party collectors to enhance debt collection practices," Samuels told the Institute of Mercantile Agents conference in Melbourne yesterday.

"It is the ACCC's view that original creditors cannot wash their hands of the responsibilities of debts once they have been sold."

That comment raised some eyebrows in the audience. It was certainly news to Alan Harries, the chief executive of the newly formed Australian Collectors and Debt Buyers Association.

"You would have thought under a deed of assignment where the debt is wholly and solely sold off to a debt buyer who steps into the position of assignee, that that is the end of the line for the original creditor," Harries said.

"Now the regulator is flagging that they don't want to see banks and finance companies on-selling the debt and stepping away from the obligations they had when they originally wrote the business.

"I'm not sure how that would work in practice; it seems to represent a different approach to what we all understood the environment to be.

"Now banks give a warranty that the debt is of a particular type and all processes have been properly followed and so the only time there can be relief from that debt is if the debtor is made bankrupt and that wasn't disclosed by the original financial institution."

National Australia Bank currently faces an action by consumer groups regarding alleged unconscionable conduct by its debt collector ACMS.

The Australian Collectors and Debt Buyers Association, with seven founding member companies, was formally unveiled at the IMA national conference in Melbourne yesterday. The new group spent much of the afternoon talking about a new code of conduct for members.

Samuels acknowledged that many complaints from debtors related to just a couple of major operators and that misconduct is not a systemic issue in the industry. ACMS is not a member of the new association.

Samuels issued a discussion paper "Debt collection practices in Australia". The deadline for responses to the issues paper is the end of June.