What is Debt Collection?
Debt collection is the process of collecting payments of debts that are owed by individuals or businesses. Creditors and collectors seek to secure payment from individuals or businesses who are legally bound to pay money that they owe. Debts can either be recovered through the courts or by using a debt collection agency or creditor.
Debtors are the person or the business who owes the debt and they are responsible for paying their debts. A debt collector can either be a bank, a company that acts on behalf of the bank or a company that collects the debt for themselves where the debt has been assigned. Debt assignment is the sale or assignment of a debt to a third party (like a debt collection agency).
What will the debt collector do?
Usually, when debt collectors are trying to get the debtor to pay their debt, they will call the debtors or send them letters. Initially, a debt collector will usually send a letter of demand to the debtor, demanding that payment is made by certain time period, or legal action may be taken. If there is no response to this, it is common for a final letter of demand to be sent, or a phone call.
What restrictions do debt collectors have?
Debt collectors should only contact debtors when it is necessary and made for a reasonable purpose such as making demand for payment, making arrangements for repayment etc. Debt collectors typically should not contact debtors more than 3 times per week, after 9pm or on public holidays. They also should not make visits to the debtors home unless there is no other way that they could make effective contact with the debtor.
In Australia, a debt collector must not:
- Use physical force or coercion;
- Unreasonably harass or hassle the debtor;
- Mislead or deceive the debtor regardless of intention; or
- Take unfair advantage of any vulnerability, disability or other similar circumstances affecting the debtor (this is unconscionable conduct).