Debt Collection Australia
Cash flow is a top concern for the 3.1 million small businesses operating in Australia. And with small businesses owed an estimated $26 billion in unpaid invoices (Galaxy Research, 2015), debt collection in Australia becomes a necessary process for any business owner navigating the late payments trend.
Debt collection industry overview
In Australia, a wide range of businesses undertake debt collection activities: from original creditors trying to recover cash on unpaid invoices through their in-house credit management functions, to third party debt collectors who collect debts on behalf of the original creditor, or buy debts and collect on their own asset.
The debt collection industry in Australia is often described as complex. There are different licensing requirements across states, and federal regulations to comply with, with some responsibilities coming under the jurisdiction of agencies such as the Office of the Australian Information Commissioner or state and territory offices of fair trading. Debt recovery through the courts is largely regulated by state and territory law and the procedural rules of the courts.
The Australian Competition and Consumer Commission (ACCC) is an independent authority of the Australian Government, and along with the Australian Securities and Investments Commission (ASIC), it enforces laws relevant to debt collection.
There are a range of industry associations that promote the professional and ethical conduct of creditors, collectors and other agents involved in debt recovery activities. These include:
- Australian Collectors and Debt Buyers Association
- Australian Institute of Credit Management
- The Institute of Mercantile Agents
Relevant laws around debt collection in Australia
There are state laws relevant to the licence requirements of debt collectors, collection agents etc. For example, debt collectors who operate in Western Australia need to have a licence under the Debt Collectors Licensing Act 1964.
A number of federal laws apply to debt collection in Australia and include:
- National Consumer Credit Protection Act 2009
- National Credit Code
- Privacy Act 1988
- Australian Consumer Law 2011
- Australian Securities and Investments Commission Act 2001
- Competition and Consumer Act 2010
Principles of debt collection in Australia
The principles of debt collection in Australia are outlined in the ACCC and ASIC document Debt collection guidelines for collectors and creditors(2016). The document largely deals with the non-court debt recovery process and informal collection activities before a court action is commenced. While the guideline does not have legal force, businesses issuing trade credit and engaging in debt collection activity are encouraged to follow the guideline and incorporate it into staff training.
The ACCC and ASIC encourage creditors and collectors to be flexible, fair and realistic in payment arrangements and to recognise the financial hardship and credit stress a debtor may be under. This does not preclude a creditor from taking legal action to recover a debt. However, creditors must not misrepresent their intention to take action (legal or otherwise) or their entitlement to seize goods.
Debtors should be treated with courtesy, respect, and fairness. Further, they are not to be harassed to an unreasonable extent or mislead in any capacity. Creditors cannot use physical force or coercion or take unfair advantage of disabilities or vulnerabilities.
Acceptable reasons for contacting a debtor include:
- giving information about a debt
- conveying a demand for payment
- proposing a settlement solution
- investigating whether the address of a debtor has changed.
A company implied to debtors that it was a firm which specialised in commencing legal proceedings for the recovery of debt, that it frequently commenced such proceedings, and that the particular matter had been referred to the company’s lawyers for the purpose of commencing legal proceedings, when none of these implications were correct. The court found that the company persistently engaged in misleading or deceptive conduct by making such implications.
ASIC v Accounts Control Management Services Pty Ltd  FCA 1164
Civil and administrative tribunals in Australia
Once a business has tried to collect the debt, with no success, it may turn to a civil or administrative tribunal in its State to determine that matter without legal representation or proceeding to court. There are civil and administrative tribunals in all major cities: Sydney, Melbourne, Brisbane, Canberra, Hobart, Adelaide, Darwin and Perth. Administrative tribunals are concerned with executive actions of government. Civil tribunals are concerned with resolving private disputes. Civil tribunals have a maximum tribunal claim amount.
Civil and Administrative Tribunals by State:
As the late payments trend continues upwards (Dun and Bradstreet, Australian Trade Payments Analysis, Q1 2017), more than ever, creditors need to understand their rights and responsibilities and the debt collection landscape in Australia.
To simplify debt collection for your business, contact ezyCollect for your in-house needs, with easy escalation to third party agencies. Email us at getpaid@ezyCollect.com.au or book a demo today.