Debt collection in Australia is a service that encompasses both amicable and legal collections that can be handled by following a set of procedures which will first involve proper reminders and negotiations with the debtor.
Our team of attorneys in Australia specializes in recovering debts and can help you settle any undue payments, both by using non-judicial and judicial methods.
Debt collection stages in Australia
The steps described below are a general description of a debt collection process, with emphasis on amicable recovery for the purpose of maintaining positive business relationships with the debtors.
The following are the main steps in debt collection procedures:
- first notification – this is the first step in collecting debts when the creditor sends the invoice and all of the information needed so that the payment can be made and it can be followed up by a confirmation of invoice receipt;
- reminder – many debtors will need one or more reminders after the invoice has been issued and the creditor can use a friendly reminder by e-mail or telephone;
- late payment inquiry – after the due date has passed, the creditor can inquire about the motives for the late payment and if this is an unusual situation with a long-standing client, this is a good time to solve the issue and perhaps work through a payment plan;
- final notification – if no special situation is in place and the client continues to postpone the payment even after repeated reminders, then the creditor can send a final notice informing that legal action will be commenced;
- judicial recovery – our team can help you commence the litigation phase when all previous attempts to collect the debt have failed.
Our lawyers in Australia are here to support you in collecting undue payments, from the first reminder letters to the commencement of the formal litigation proceedings.
What are the obligations of debt collectors in Australia?
Debt collection is done through debt collection agencies or through other entities that have expertise over debt collection procedures, such as our law firm in Australia.
Commonly, persons who carry out debt collection activities are known as debt collectors. Debt collectors have a set of responsibilities and obligations and provided that if a debt collector surpassed his or her responsibilities, the debtor has the right to take a legal action against the respective person.
In Australia, debt collectors can be reported to the local institutions for inappropriate behavior, which can take the form of harassment for example.
Persons who have had a negative experience with a debt collector can address the respective issue to the Australian Competition and Consumer Commission (ACCC), in the case in which the debt collector did any of the following:
- misled the debtor;
- used physical force against the debtor;
- harassed the debtor – and this includes the number of times in which the debtor was contacted, when the debtor was contacted, etc;
- took advantage of any vulnerability of the debtor.
There are other actions that enter into the category of illegal behavior and we invite you to address to our lawyers in Sydney if you need legal counselling regarding the possible legal actions one can take when situations like these occur.
What is the law applied to debt collection procedures in Australia?
There are many rules of law that regulate debt collection, including debt collection proceedings. Below, our lawyers in Australia outlined the most important regulations:
- Limitation Act 2005 – it regulates the maximum period of time in which debt collection proceedings can be initiated;
- Fair Trading Act 2010 – the law is based on the main law, which is Trade Practices Act 1974;
- National Consumer Credit Protection Act 2009 – it regulates consumer credit transactions;
- Unauthorised Documents Act 1961 – it forbids certain designs for letters of demand, as they do not have to be similar with documents issued by the competent courts;
- other regulations derive from the Privacy Act 1988 and the Bankruptcy Act 1966.
Please mind that additional regulations are prescribed by other rules of law. For instance, the Debt Collectors Licensing Act 1964 stipulates that the debt collector is not allowed to impose any fees or charges outside the ones established with the client who appointed the debt collector.
This is stipulated under the Section (13)(1)b of the above mentioned Act. Breaching of contracts by the debt collectors can result in various penalties.
For instance, in Victoria, a debt collector can be charged with the following, as per the regulations of the Australian Consumer Law and Fair Trading Act 2012:
- persons who are considered prohibited persons for this activity, who engage in debt collection, can be charged with 2 years of prison or 240 penalty units;
- where the prohibited person is a corporation, the penalty is of 1200 penalty units;
- if a prohibited person received a permission for debt collection activities, then he or she must abide by the conditions of the Business Licensing Authority, as per the rules of the Section 50(3) – if not, this will result in 240 penalty points/2 years in prison/1200 penalty units for corporations;
- debt collectors are not allowed to charge the debtor for the cost of the procedure – if this happens, then a penalty of 120 points is imposed;
- causing harassment or distress to the debtor can result in a court procedure, where the debt collector can be required to pay $10,000.
Please mind that 1 penalty point is calculated at a value of $184,92 (for the financial year of 2022-2023).
Choosing the debt collection method
As a general rule, it is recommended whenever possible to resort to amicable debt recovery. This is a preferred method because it does not involve the extra costs associated with the legal proceedings in court.
Our team of Australian lawyers can provide counseling according to your particular case. When an amicable collection is not possible, we will help you take legal action against the debtor.
Contact our law firm in Australia for complete details about legal debt collection and the services we provide to companies.