ASIC has updated its guidelines for debt collection, emphasising the need for creditors and debt collectors to take a flexible approach to dealing with debtors and warning they must not threaten action they are not authorised to take.
The guidance covers appropriate contact, privacy obligations, rules around legal action and procedures and complaints handling. It also provides an update on the many laws that relate to debt collection.
ASIC and the ACCC, which produced the regulatory guide (RG 96) jointly, say the goal for debt collection should be “a flexible, fair and realistic approach to collection”.
The regulatory guide says: “A flexible approach involves making meaningful and sustainable arrangements that reasonably take into account a debtor’s ongoing living expenses to enable them to live in basic comfort and prevent impoverishment and humiliation.
“If you are aware that a debtor is unable to make meaningful and sustainable repayments towards a debt, then continuing to contact the debtor to demand payment will not be reasonable or appropriate.”
The guide warns creditors and debt collectors not to mislead debtors by telling them they are not able to enter into repayment arrangements.
While debts can be recovered through the courts, the regulatory guide warns that any threat to take legal or other action that the debt collector does not have instruction or authority to do may amount to misleading or deceptive conduct.
The same goes for making a threat that the debt collector has no intention of carrying out.
In 2012, ASIC took Accounts Control Management Services to court for implying to debtors that it specialised in commencing legal proceedings to recover debt and that the matter in questions had been referred to the company’s lawyers, when none of this was true.
The court found that the company persistently engaged in misleading or deceptive conduct.
The guide also cautions that if the creditor is considering assigning a debt to an agency and the debt is in dispute, it may not be appropriate to assign the debt at all.
“A person must not be pursued for a debt unless there are reasonable grounds for asserting that the person is liable for the debt,” the guide says.
It is not uncommon for people to receive requests for payment of an unpaid debt because they have the same name as the person who incurred the debt.
In a 2020 Federal Court case brought by the ACCC, Panthera Finance was found to have insisted that people disprove their liability. The court ruled that the company’s conduct constituted undue harassment.