DEBT COLLCECTION - WHAT WE WANT

1. National fair debt collection legislation (covering all collectors of consumer debts).

2. Effective internal and external dispute resolution processes.

3. Effective enforcement.

 

4. Stricter obligations on creditors when they outsource debt collection or sell debts.

5. Legal proceedings for consumer debt should not be issued outside the state where the consumer lives.

BACKGROUND 

1. National fair debt collection legislation

Most debt collection is now done by large national debt collection firms, however there is a range of ad hoc state legislation and no national legislation specific to debt collection. Current laws are inadequate and fail to cover a range of unfair practices. National legislation should:

• prohibit a range of unfair practices;
• cover all collectors of consumer debts (including companies collecting their own debts);
• require collection to be carried out fairly, honestly and efficiently;
• provide for compensation to be paid to consumers when legislation is breached; and
• require debt collectors to be licensed.

2. Effective internal and external dispute resolution processes

Debt collection firms must have effective internal dispute resolution procedures that ensure, where appropriate, certain disputes are immediately referred to the original credit provider. Any external dispute resolution scheme made available by the original creditor should continue to be available to the consumer regardless of whether the debt is outsourced or sold.

3. Effective enforcement

Consumers facing unfair debt collection practices are often intimidated and unable, or unwilling, to lodge a complaint with a regulator. Even where a consumer lodges a complaint, regulators may be reluctant to take enforcement action because of resource constraints, or due to other priorities. However, a lack of enforcement can encourage a culture of non-compliance. Enforcement must be designed to ensure that illegal or unfair practices are discouraged – even in situations where consumers are reluctant to lodge complaints. Penalties that can be self-enforced by consumers would be a key component of a more effective enforcement regime.

4. Stricter obligations on creditors when they outsource or sell debts

Credit providers must ensure that the affect of agreements with debt collectors (whether acting as agent or purchasing the debts) ensures that consumers are not disadvantaged if collection is outsourced. In particular, consumers should have the same access to information and documents about the debt claimed, and to dispute resolution schemes, whether or not collection is outsourced.

 

5. Legal procedings should be issued in the state where a consumer lives

Legal proceedings for a debt can be issued in any jurisdiction in Australia, regardless of where the consumer lives or where the contract was entered into. If proceedings are issued in a distant jurisdiction, and the consumer wishes to lodge a defence, additional legal steps are required. The legal costs involved can dissuade a consumer from lodging a defence, and community legal centres have limited resources to deal with such matters.