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Credit law toolkit

Debt collection

Main Points

  • A debt collector who is the agent of a credit provider is exempt from being licensed and in EDR in some circumstances. The credit provider will usually be in EDR.
  • If a debt collector buys a regulated credit contract debt entered into after 1 July 2010, it becomes the credit provider and must be licensed and in EDR.
  • Debt collectors must give the consumer a Credit Guide if they are licensed or in EDR.
  • Check if the debt is statute barred before advising your client to make repayments.
  • Consumers can be the victim of mistaken identity or fraud. If this is suspected, request documents.
  • If the consumer is a victim of debtor harassment consider making a complaint to ASIC and EDR.

Debt collectors

This chapter is about debt collectors. Debt collectors are specialists who only collect debts. The credit provider can either:

  • Ask the debt collector to act on its behalf to collect the debt (act as an agent). If the debt collector is an agent, the credit provider is still responsible for the debt and complying with the Credit Law; or
  • Sell the debt to the debt collector (assignment).

Credit providers can collect their own debts and the information in this chapter can also be applied to credit providers collecting their own debts. Similarly, any reference to an obligation imposed on a credit provider in this kit applies equally to a debt collector except in relation to licensing and EDR as explained below.

Licensing and EDR

Debt collectors are caught by the new Credit Law when they either:

  • Exercise the rights of the credit provider under a regulated credit contract; or
  • Purchase a debt arising from a regulated credit contract, in which case they become the credit provider.

In both cases, these are credit activities that are caught by the law (ss. 6 & 10 NCCP).

This means that debt collectors who have purchased the debt (also known as assignees or debt factors) will need to be licensed in their own right and be member of an EDR scheme like any other credit licensee. It does not matter how many times a debt is sold; the NCCP covers the new credit provider assignee in the same way each time (s. 10(2) NCCP).

Debt collectors, who are acting as agents for the credit provider, do not need to be licensed and members of EDR, provided they meet the criteria for the exemption. It is still worth checking whether a particular debt collector you are dealing with is in an EDR scheme, because increasingly debt collectors have been joining EDR schemes voluntarily or perhaps because they have been pressured to do so by the credit providers using their services. Debt collectors might also be collecting in both capacities, as agent for some contracts and assignees for others. In this case they will be required to be licensed and members of EDR. Once a debt collector joins an EDR scheme, the scheme will be able to consider a dispute about non–regulated debts, provided the dispute is otherwise within its jurisdiction.

Debt collectors

So if you have a dispute with a debt collector:

  • If the debt collector is acting as the agent of the credit provider raise a dispute with the credit provider (send a copy of the dispute to the debt collector). If the dispute is unresolved lodge in EDR against the credit provider.
  • If the debt collector has bought the debt raise a dispute with the debt collector. If the dispute remains unresolved lodge a dispute in EDR.

Other aspects of the Credit Law

As debt collectors are not involved in the initiation of credit contracts, they are not covered by the requirement to assess the suitability of credit contracts. However, debt collector assignees must:

  • Comply with the general conduct provisions and all other requirements of credit licensees (Division 5 NCCP); and
  • Give the debtor under a contract a Credit Guide as soon as practicable after accepting the assignment of a contract (s. 127 NCCP credit contracts, s. 150 NCCP leases).

The Credit Guide must:

  • Be in writing
  • Specify the credit provider’s (the debt collector assignee’s) name, contact details, and license number
  • Details of the credit provider’s (the debt collector assignee’s)–
    • Internal Dispute Resolution Procedures
    • The EDR of which the credit provider (the debt collector assignee) is a member

If the Debt Collector is acting as an agent of the credit provider instead of as an assignee, then these obligations do not apply.5 Instead, the obligations are placed on the credit provider, and the credit provider is responsible for the conduct of the debt collector if any obligation has not been complied with (Chapter 2, Part 2–3, Division 4 Liability of Licensees for Representatives ss. 74–78, and ss. 324 and 325 of the NCCP).

A Debt Collector who is a licensee, or appointed a credit representative, under the credit law, also has to give a Credit Guide covering the same issues outlined above as soon as practicable after it has been authorised to collect on the credit provider/lessor’s behalf. A Debt Collector who is working as an agent of the credit provider (not an assignee) but neither is licensed nor appointed a credit representative does not have this obligation.

5 Unless the debt collector is a licensee or appointed as a credit representative, in which case they have to also give a Credit Guide as soon as practicable after being authorised to collect a debt.

Compliance with the NCC

Debt collectors are required to comply with any relevant obligation placed on the credit provider under the NCC. In practice, this will most often include:

Other issues, such as disclosure, misleading and deceptive conduct, and unjust or unsuitable contracts, may arise after a debt collector has purchased a debt. As these complaints usually relate to events that occurred prior to the assignment of the debt, there may be “buy–back” arrangements between the debt collector assignee and the original credit provider. In practice you would lodge your complaint with the debt collector (being the owner of the debt) as it is responsible for resolving any dispute raised.

Other legal issues

Three common problems occur with debt collection by debt collectors:

  1. Collection of old debts
  2. Mistaken identity/fraud
  3. Debtor harassment

Other problems do occur and if you are unsure, get legal advice.

Statute barred debts

A statute barred debt is a debt to which the consumer has a complete defence at law because of the operation of a limitation act. There are various limitation acts that apply throughout Australia. They differ in a number of ways, but each places a limit on the period of time a credit provider has to enforce a debt.

Usually, there is a period in which to commence court action to enforce a debt, and a further period in which to enforce any judgment. For example, in NSW a credit provider has 6 years to pursue a debt in court from the date the debt arose, the date of the last repayment or written acknowledgment of the debt (whichever comes last). After the 6 years has passed, the consumer has a complete defence to the debt claimed. However, a longer period applies for mortgages. Once a judgment has been obtained, the credit provider has a further 12 years to enforce the judgment.

As the rules and periods vary in the various States and Territories, and with different types of contracts and claims, you should get legal advice applicable to your jurisdiction. You should be sure you are familiar with the most common limitation periods applying to credit contracts in your State or Territory, so that you are aware of when this issue might be likely to arise.

Do NOT advise your client to make a repayment towards a debt or acknowledge the debt in writing if you think the limitation period has expired, or is about to expire. If you are writing to the credit provider you should also be very careful to acknowledge the debt is owed by your client. This is because in most jurisdictions a payment or written acknowledgment of the debt can restart the limitation period afresh, giving the credit provider many more years to enforce the debt. If your client has made a recent repayment or written to the credit provider, get legal advice. The rules vary about what happens when a repayment or written acknowledgment is made after the expiry of the limitation period.

Case Decision

Ms Taylor, who was unemployed, had negligible assets and a dependent deaf teenager, made two payments totalling $5,000 on her credit card towards a statute barred debt. The Supreme Court of Victoria Collection House Limited v Taylor [2004] VSC 49 (3 March 2004) upheld a decision by the Victorian Civil & Administrative Tribunal that it was unconscionable for a debt collector to insist on repayment of such a substantial sum from an impecunious and unsophisticated debtor in circumstances where the debtor was unaware that she had a complete defence at law. If your client is in a similar position, get legal advice!

Mistaken identity or fraud

It is common for credit providers to sell debts in circumstances where they have lost contact with the consumer. In such cases, the debt collector then has to try to find the consumer before they can collect the debt. When a debt collector believes they have found the debtor, they will then make a demand for payment. Sometimes they get it wrong and demand the money from the wrong person, particularly if the person has the same name, or a very similar name, as the debtor.

If this happens to one of your clients, you need to write to the debt collector immediately disputing the debt and asking for documentation to support the existence of the debt. In some cases, the consumer will need to go to considerable lengths to prove that they are not the debtor. This is unfair, but unfortunately necessary. If you think the debt collector is being unreasonable, lodge a complaint in EDR. Provide as many details as you can to the EDR scheme that your client is not the debtor, so that the onus is clearly on the debt collector to satisfy the EDR scheme that your client is in fact the debtor (for example, by providing an application form or 100 points of identification used when the loan was applied for). If they are not a member of an EDR scheme get legal advice.

If you convince the debt collector that they are dealing with the wrong person:

  • Ask that the debt collector confirm this in writing and tell the consumer to keep a copy of this letter for an indefinite period.
  • If the debt collector won’t confirm this in writing, write a letter to the debt collector confirming that the debt collector has acknowledged that the debt is not your client’s. Immediately lodge in EDR to have the matter confirmed.
  • Make sure your client’s credit report does not have an inaccurate listing relating to the (inaccurate) debt. If it does, ask the debt collector to remove all of the inaccurate listings. If the debt collector refuses or won’t respond, lodge in EDR.

There are many instances where the same debt collector, or a subsequent assignee, will try again to collect from the same person despite the apparent resolution of the dispute so evidence of the resolution of the dispute is very helpful.

A similar problem can occur when your client’s details have been used to obtain credit fraudulently. In these circumstances, it can be even more difficult to convince the debt collector or credit provider that your client is not the debtor, but the principles outlined above still apply. If your client has been the victim of identity theft they should get legal advice. More information can be found www.ag.gov.au/identitysecurity

Sometimes your client will tell you that it is not his or her debt simply because the debt collector is unknown to them. Always get a copy of the original credit contract and details of the assignment so that you can make sure that it is not a debt the client has simply forgotten.

Remember, always get your client to check his or her credit report if they are being chased for a debt they do not owe. There will often also be an incorrect listing on their credit report pertaining to the debt. When you are negotiating with the debt collector or credit provider, removal of the listing should be one of the outcomes you insist upon as part of the resolution of the dispute. If your client gets a copy of their credit file their personal information will be updated, so if a debt collector is actively looking for them the new information will be available.

Debtor harassment

Debtor harassment is a frequent problem for consumers dealing with debt collectors. Debtor harassment is a breach of section 12DJ of the ASIC Act, which prohibits the use of physical force or undue harassment or coercion in connection with the supply of, or payment for, a financial service6.

ASIC and the Australian Competition and Consumer Commission have jointly produced a guideline detailing the types of conduct that might constitute a breach of the law. The Debt collection guideline: for collectors and creditors, (“the Debt Collection Guideline”) is available at: www.moneysmart.gov.au.

Examples of conduct that might breach the Guideline include:

  • Contact for the purpose of frightening, intimidating, exhausting, or embarrassing the debtor
  • Contacting a debtor after 9:00 PM at night or before 7:30 AM on weekdays or before 9:00 AM on weekends
  • Contacting a debtor by telephone more than 3 times per week or 10 times per month
  • Misrepresenting the credit providers rights at law – such as indicating an intention to seize property over which there is no mortgage without an appropriate court order
  • Revealing details of the debtor’s indebtedness to third parties, such as colleagues and neighbours
  • Advising a consumer that it does not enter into repayment arrangements when this is not accurate
  • Demand repayment in full or a large up front payment when the consumer cannot afford the requested payments
  • Demand a large up front payment before a repayment arrangement will be considered
  • Insist that the consumer get a loan from a credit provider or friends/relatives
  • Insist on the consumer accessing their superannuation early

The Guideline is not law and the courts would ultimately decide whether a particular course of action constituted undue harassment or coercion. However, the Guideline is a good indicator of the types of conduct that should be reported to ASIC, and will no doubt be highly persuasive in an EDR complaint. Further, compliance with the Guideline has also been incorporated into the industry codes of practice and failure to comply with the Guideline would constitute a breach of the relevant code of practice.

If your client has been the subject of debtor harassment you can:

  • Write to the debt collector or credit provider alleging a breach of the Guideline and ask that the conduct cease (Sample letter: Debtor harassment); and/or
  • Raise a dispute with the IDR of the debt collector or credit provider seeking compensation for the consumer and lodge a complaint in EDR if the dispute is not resolved to your client’s satisfaction; and
  • Make a complaint to ASIC. (See Complaining to ASIC.)

6 - Other debts, such as telecommunications debts, are covered by s.50 of the Australian Consumer Law and the Australian Competition and Consumer Commission is the appropriate regulator for complaints.


Compensation for harassment will not be large unless the conduct is extreme. For example, when ASIC took action against GE for their debt collection practices (Media Release 08–106 ASIC acts on GE Money’s insurance and debt collection practices available at www.moneysmart.gov.au) the typical range for compensation recommended by FOS was from $250 to $1,000. If there were multiple claims for different types of harassment, the total compensation payable may be greater, but the EDR scheme may also have a cap on the total amount of non–financial loss that can be claimed. The fact that your client has been harassed does not reduce your client’s liability for the debt.