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Conduct

Guidelines on appropriate conduct for debt collectors

In Western Australia, the Fair Trading Act 1987 and the Consumer Credit (Western Australia) Code contain provisions that prohibit certain behaviour towards consumers.

The applicability of these laws and other Commonwealth and State legislation to the conduct of debt collectors is examined in the ASIC-ACCC publication Debt Collection Guideline: for collectors and creditors. This publication spells out what debt collectors should and should not do to avoid breaking the laws and mandatory codes.

Importance of the Guideline to creditors

Even if a creditor objects to the collection activities of their agent, or if the agent acts in a manner that is inconsistent with an agreement or understanding between the creditor and agent, the creditor may still be responsible for their agent's actions.

A creditor can also be held accountable for debt recovery conduct by an 'assignee' (i.e. the person or corporation who has bought or been assigned the debt).

Making contact with the debtor

Before pursuing someone for payment of a debt, it is essential that you are certain that the person is liable for the debt.

You should only contact the debtor for a practical purpose and only to the extent necessary to recover the debt. Unnecessary or persistent contact could be classified as 'undue harassment'.

Once contact has been made, further contacts should occur no more than three times per week. (This includes letters and telephone calls to the debtor.)

If face-to-face contact is necessary, it is recommended that this occur no more than once per fortnight.

It is also recommended that you request assistance from a third party to ascertain a debtor's whereabouts no more than once every six months.

If at any time you are asked to leave the debtor's residence or workplace, you must do so immediately.

Privacy obligations

Under the Privacy Act 1988, it is the responsibility of the collector to ensure the privacy of debtors.

When contacting the debtor for the first time, your first priority should be to confirm that the person you have contacted is the debtor. You must do this each time you contact a new debtor, before you disclose any information about the debtor or the debt.

Once you have verified that the person you have contacted is the debtor, you need to bear in mind that the limits on disclosing information to third parties also apply to the debtor's spouse, partner and/or family.

Providing information and documents

If the debtor asks to view their personal credit information held by you, they have a right to do so and to correct it if it is inaccurate.

You must provide this information as quickly as possible. The Consumer Credit (Western Australia) Code sets out specific timeframes for providing information on request when the debt relates to a consumer loan, credit card facility or similar credit product.

The Code states that information must be provided within 14 days if what is requested relates to the preceding 12-month period. Otherwise, a 30-day timeframe applies.

If a request for information relates to a disputed amount, you should stop all collection activity until you have provided the information requested to the debtor.

In some situations, failure to provide information may amount to misleading, deceptive or unconscionable conduct.

If liability is disputed

If the person you contacted about payment of a debt tells you that they are not the debtor or that the debt has already been paid and you have no evidence to the contrary, you must defer further collection action until you can confirm the debtor's identity and liability.

If you ignore their claims and carry on with the collection activity, you risk breaching one or more of the consumer protection laws if in fact the alleged debtor is not liable for the debt.

If neither the creditor nor collector can provide proof of the debtor's liability, collection activity should be suspended indefinitely.

In legal proceedings, proof of the debt rests with the party that alleges the debt is owed to them. It is misleading to state or imply that it is up to the debtor to prove that payment of the debt is not their responsibility.

Conduct by the debtor

Inappropriate behaviour on the part of the debtor does not mean a collector can engage in similar conduct. If the debtor becomes violent, a debt collector should cease contact immediately and refer the matter to the police.

Repossession

The Consumer Credit (Western Australia) Code precludes collectors and creditors from entering onto residential premises to take possession of mortgaged goods without Court approval or written consent from the occupier of the premises.

In addition the Criminal Code states that a person who, without lawful excuse, enters a property without the consent or licence of the owner, occupier or person having control or management of the place; or remains on the property after being requested by a person in authority to leave, is guilty of an offence.

For information on the different roles played by ASIC and the ACCC in relation to debt collection activity, refer to the brochure entitled: Complaints about debt collection - the responsibilities of Commonwealth  agencies.

Debt collector behaviour

The Fair Trading Act 1987 contains specific provisions prohibiting inappropriate conduct towards consumers and thus it has particular relevance to the debt collection industry.

Prohibition of the use of physical force, undue harassment and coercion

The use of physical force, undue harassment and/or coercion to effect payment for goods or services/financial services is prohibited. This also applies if the conduct is directed towards a third party (eg, a debtor's family member).

Prohibition of misleading and deceptive conduct

Collectors must not make any statement or behave in ways that are misleading or deceptive or would be expected to mislead or deceive (for example, impersonating someone or attaching a false letterhead to a document). Collectors could contravene this provision unintentionally. In some instances, failing to disclose information could constitute misleading and deceptive conduct.

Collectors could contravene this provision unintentionally. In some instances, failing to disclose information could constitute misleading and deceptive conduct.

Prohibition of unconscionable conduct

Collectors must not exert undue pressure or influence on, or employ unfair tactics against debtors, especially the vulnerable and/or disadvantaged.

A debtor or third party who suffers loss or damage due to a collector's infringement of any of the three general prohibitions outlined above is entitled to be reimbursed by the amount of their loss via an action for damages. A debtor or third party may also be eligible for injunctive relief.