Debt collector restrictions and conduct

The conduct of debt collectors towards debtors (people obligated or allegedly obligated to pay a debt) is covered by provisions in a number of consumer protection laws including:

• the Fair Trading Act 2010 (administered by Consumer Protection);
• the National Credit Code (administered by ASIC);
• the Privacy Act 1988 (Commonwealth legislation);
• the Competition and Consumer Act 2010 (previously the Trade Practices Act 1974, (administered by the ACCC); and
• the Australian Securities and Investments Commission Act 2001 (administered by ASIC).

The joint ACCC-ASIC publication Debt Collection Guideline: for collectors and creditors sets out what debt collectors should and should not do to avoid breaching these laws, other related legislation and mandatory codes. For a concise summary of the information in this publication, refer to Conduct.

Fair Trading Act 2010

This Act incorporates the Australian Consumer Law and is based on the Competition and Consumer Act 2010 (Cwlth) (previously the Trade Practices Act 1974 (Cwlth)) and mirrors its misconduct prohibitions and enacts the provisions of the national consumer law into Western Australia. Aside from those sections relating to the conduct of debt collectors detailed on the conduct page, this Act bans the design of collection letters of demand so that they resemble court documents.

Limitation Act 1935

This Act concerns limitation periods on debt recovery actions. It prevents a creditor from recovering payment for a debt if the limitation period has expired. The limitation period is generally six years.

National Consumer Credit Protection Act 2009 incorporating the National Credit Code (the principal vehicle that regulates consumer credit transactions in Australia)

This Code contains provisions for debtors' access to account information and documents; varying repayment schedules on the grounds of temporary hardship; and enforcement of credit contracts, mortgages and guarantees.

Privacy Act 1988 (administered by the Office of the Privacy Commissioner)

Part IIIA of this Act regulates the collection, use and disclosure of personal information. It requires businesses to keep accurate, complete and up-to-date records and to give debtors access to the information held about them on request.

Bankruptcy Act 1966 (administered by the Insolvency and Trustee Service Australia)

Under this Act, 'provable' debts of a bankrupt debtor are dismissed. Most unsecured debts are classed as provable. To settle provable debts, a collector must follow the scheme of administration under the Act.

The Fair Trading Act 2010 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 eg, 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.