Please read and study this guide. Get familiar with its terminology and acts. Quote, cut and paste its contents. Every council and enforcement agency that generate debts and debtors through fines, must abide by this guide. This guide provides a level playing field. Read the case studies where damage and loss were restored to the debtor for inappropriate conduct. This guide explains our protections. Its our own ignorance that puts us at a disadvantage.
What this guideline covers
Commonwealth consumer protection laws
This guideline explains the application of the following Commonwealth consumer protection laws, which are relevant to debt collection:
- The Australian Consumer Law (ACL), which is a schedule to the Competition and Consumer Act 2010(Cth) (CCA). The ACL is jointly enforced by the ACCC and state and territory consumer protection agencies
- Part 2, Division 2 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), which is enforced by ASIC
- National Consumer Credit Protection Act 2009 (Cth) (NCCP) which includes the National Credit Code (NCC) as Schedule 1 to the NCCP, which is enforced by ASIC.
Part 2 of this guideline provides practical guidance on what creditors and collectors should and should not do to minimise their risk of breaching the Commonwealth consumer protection laws that may apply when undertaking debt collection activities.
When seeking to recover a debt, part 3 of this guideline looks at the prohibitions and remedies against creditors or collectors who engage in:
- the use of physical force, undue harassment or coercion
- misleading or deceptive conduct
- unconscionable conduct.
Part 3 of this guideline also contains information about the penalties that apply for contraventions of the Commonwealth consumer protection laws.
This guideline also refers to other laws and regulations that are not enforced by the ACCC and ASIC, but which are relevant to debt collection. These laws include:
- Commonwealth privacy laws, which are enforced by the Office of the Australian Information Commissioner (OAIC)
- state and territory fair trading laws, which include conduct prohibitions mirroring those of the Commonwealth consumer protection laws and that are enforced by the state and territory consumer protection agencies
- the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), which is enforced by the Australian Financial Security Authority (AFSA, formerly the Insolvency and Trustee Service Australia (ITSA)).
Various other laws, regulations and industry codes are also referred to in passing throughout this guideline. For a non-exhaustive list of other applicable laws, see appendix B. Also see the comments under Relationship with court debt recovery processes in this guide.
Note: this guideline does not provide guidance on the law on mortgages and other securities or guarantees.’
There are many reasons a debtor may be unable to make meaningful repayments towards a debt, including where they are:
- on a limited fixed income (whether on a temporary basis or for the foreseeable future, for example, with an aged pension)
- suffering significant, chronic or long-term illness or injury
- There may be circumstances where contact is made for a reasonable purpose, or contact is made initially for a reasonable purpose, and yet other relevant considerations mean the contact becomes unreasonable or unacceptable.8 Relevant considerations may include the debtor’s mental illness or intellectual disability, or the debtor’s incarceration.
- Unduly frequent contact designed to wear down or exhaust a debtor, or likely to have this effect, constitutes ‘undue harassment’ or coercion and must be avoided. This is particularly likely if the collector makes a number of phone calls or other contacts in rapid succession. See part 3, Commonwealth consumer protection laws.
Prohibition of unconscionable conduct
Conduct may be unconscionable if it is particularly harsh or oppressive. It is behaviour that is substantially more than just hard commercial bargaining. The relationship or dealings between a creditor or collector and a debtor is one that could assume characteristics of unconscionable conduct. This is because the collector is often in a position of strength and can exert pressure or unfair tactics over a debtor.
This type of unconscionable conduct occurs when one party knowingly exploits the special disadvantage of another. This is general unconscionable conduct according to historical judge-made law. Factors that may give rise to a special disadvantage include:
- ignorance of a debtor of important facts known to the staff or agent of the business
- illiteracy or lack of education of the debtor
- poverty or need of any kind of the debtor
- the debtor’s age
- infirmity of body or mind of the debtor
- drunkenness of the debtor
- lack of explanation and assistance when necessary.
Section 22 of the ACL and s. 12CC of the ASIC Act set out a long list of factors that courts may consider in determining whether a person has contravened s. 21 of the ACL and s. 12CB of the ASIC Act respectively, these include:
- the relative bargaining strength of the parties
- whether any conditions were imposed on the weaker party that were not reasonably necessary to protect the legitimate interests of the stronger party
- whether the weaker party could understand the documentation used
- the use of undue influence, pressure or unfair tactics by the stronger party
- the price, or other circumstances, under which the weaker party would be able to buy or sell equivalent goods or services
- the requirements of applicable industry codes
- failure of the stronger party to disclose any intended conduct that might affect the interests of the weaker party
- the willingness of the stronger party to negotiate
Appendix B: Other statutory and common law obligations and remedies
Creditors or debt collectors who engage in extreme conduct may expose themselves to civil action in tort by a debtor. Depending on the circumstances, action for trespass, assault, wilful infliction of mental injury, nervous shock and defamation (among others) may apply.
Creditors or debt collectors who engage in extreme conduct may be charged with criminal offences including assault and demanding with menace. A collector who refuses to leave a person’s property may also be charged with trespass.
Damages or injunction
Finally, a debtor or third party who suffers loss or damage as a result of a collector’s breach of the unconscionable conduct102, misleading or deceptive conduct103, harassment and coercion104, or other provisions of the ASIC Act and the CCA, can recover the amount of their loss by an action for damages under these Acts.105 A debtor or third party can also seek injunctive relief.106
Trespass to land
A credit provider or its agent must not enter private land (both residential and commercial) to take possession of secured goods unless the credit provider or its agent has:
- a court order authorising entry, or
- the express consent of the occupier.
Otherwise, the credit provider or its agent is trespassing on the occupier’s land.90 The mere existence of a debt, or a right to give notice in relation to a debt, does not create a right to enter premises for the purposes of taking secured goods where the requisite consent has not been given. A credit provider or its agent will have implied consent to enter the occupier’s land for the purpose of communicating with the occupier, including requesting consent to repossess secured goods. Such consent would not be available where the occupier has indicated whether by sign or otherwise that entry by visitors or particular visitors is unauthorised.