Often your client will be at a stage where they are being pursued by a debt collector, who is putting pressure on them either via phone, letter or in person to pay the outstanding debt.
Many creditors refer debts to a debt-collection agency. Creditors can also “sell” debts to collection agencies. When this happens, the debt collection agency becomes the creditor.
It is common for clients to come to Homeless Law stating that they have been approached by debt collectors and are concerned they will be jailed. You should reassure your client that they cannot be jailed for an unpaid debt. They also do not have to let the debt collector into their home – generally, there is no reason for the debt collector to visit a person at their home or workplace unless there is no other way for the debt collector to contact them. If the client does agree to let the debt collector into their home, the debt collector must leave when asked.
The ACL, the Australian Consumer Law and Fair Trading Act 2012 (Vic), the ASIC Act and the National Credit Act and Code contain limitations on the behaviour of debt collectors.
The Debt Collection Guideline: For Collectors and Creditors (Guideline) prepared by ASIC and the ACCC sets out limitations on how debt collectors can behave.
Importantly, a debt collector should not contact the client directly once they have been informed that you are acting for the client (or that the client has another authorised representative such as a financial counsellor or a community worker). A debt collector also must not refuse to deal with you (as the lawyer) or another authorised representative, whether by direct refusal or by placing unnecessary obstacles in the way by, for example, insisting on a particular style of form authorisation when the written authority provided already contains the necessary information. If you tell the debt collector that you do not have instructions from your client about the debt, the debt collector may contact the client directly. You should therefore make it clear that you will seek instructions and get back to the debt collector. You should also expressly ask that they not contact the client directly.
The Guideline provides that a debt collector should only contact a person when it is necessary to do so and the contact is for a reasonable purpose. A “reasonable purpose” includes:
As a guide, if contact is “necessary”, it should be limited to:
The Guideline explains the prohibitions and remedies (contained in both the ACL and the ASIC Act) against debt collectors who engage in:
Refer to section 45(2)(m) of the Australian Consumer Law and Fair Trading Act 2012 (Vic), for the legislative prohibitions on conduct by debt collectors.
If a client reports that the debt collector is calling repeatedly, contacting their employer or family members, threatening him or her (including making untrue statements about what will happen if they don’t pay) or refusing to leave the client’s property when asked, you should advise the client to write down:
You should then write to the debt collector (copying the creditor who has sold or referred the debt), referring to the Guideline and the relevant legislation and identifying any contravention of the Guideline and the relevant legislation. You should reiterate that the debt collector should not be contacting the client directly because they have been put on notice that you are the client’s representative. A sample letter for use when the client is judgment proof is available below.
If this is not successful, a complaint should be made to:
In most cases, knowing the limitations on debt collectors’ conduct will be used only to make them cease contacting your client (or to contact your client in a compliant way). If necessary, though, the following remedies are available for breaches of the legislative provisions that regulate debt collectors’ conduct:
This page contains legal information only. View our disclaimer.
Homeless Law in Practice provides resources and tools for Victorian lawyers and advocates. If you’re looking for help, visit Justice Connect.