Amanda Smith
Beth Buczynski 
Serious debt can drain your energy and leave you paralysed by fear. To make matters worse, lingering unpaid debt may be turned over to a debt collector.
It’s a debt collector’s job to recover funds that are owed to a creditor, and sometimes they can be quite ruthless in their pursuit of that goal.
If you’ve been contacted by a debt collected, it’s important to know your rights as well as the best course of action to take.
What is a debt collector?
A debt collector is sent by a lender (or acts on his or her behalf) to collect unpaid dues. Debt collectors aren’t usually sent for one bill but rather, a cumulative period of unpaid accounts. Debt collection is legal. It’s their right to seek out the fees for their services provided. What isn’t okay is using sleazy, divisive and threatening tactics to receive payment. Having unpaid debts doesn’t erase your rights.
While you might be tempted to ignore their calls, like everything financial-related, it’s best to handle debt collection head on.
Types and minimum amounts of debt they can collect
There is no minimum debt amount required to send it to a collection agency in Australia. However, the bigger the debt, the more incentive a company has to chase payment.
Debt collectors are employed to settle all kinds of unpaid bills including:
- Credit cards.
- Personal loans.
- Car loans.
- Mortgages.
- Rent.
- Business loans.
- Medical bills.
- Education debt.
- Phone and utility bills.
- Services provided.
What debt collectors can do
Australian law prevents debt collectors from using unlawful, unprofessional tactics. As consumers, it’s important to know what debt collectors can and can’t do. Lenders can face criminal charges if they employ a debt collector who breaks the law to recover unpaid dues.
Debt collectors are legally able to:
- Contact you to request payment.
- Ask the reason why you haven’t made a payment.
- Explain the consequences of failing to make a payment.
- Repossess items (on a debt of more than $10,000), after the 30-day notice period has passed.
- Offer a settlement or a payment plan.
- Review a payment plan after the agreed period.
Debt collectors can contact you the following ways:
By phone: A collector can call you Monday to Friday, 7.30am – 9.00pm, Saturday and Sunday, 9.00am – 9.00pm. They can contact you up to three times per week or 10 times per month.
Email and social media: They can message you on one of your profiles, so long as they’re certain it’s yours (and you don’t share the account).
In person: This is the last resort. If you haven’t replied to their calls or messages, they can show up at your door any day between 9.00am – 9.00pm.
Nerd tip: Debt collectors can contact or visit your workplace during normal working hours. This is another reason not to avoid their communication efforts. Seeing a stranger at your office will only make matters worse. Try to treat the debt collector as someone who is trying to help you. These people have seen it all and will likely be able to offer advice and a strategy for repayment. It doesn’t have to get nasty.
What debt collectors can’t do
Debt collectors are not able to;
- Trespass on your property.
- Use abusive verbal language or lay a finger on you.
- Harass, humiliate, misinform, or trick you.
- Contact you outside of the designated hours.
- Use a lack of knowledge or any ailments (disability, age, illness) against you.
- Divulge your debt to anyone else.
- Target your family.
Debt collectors are bound by privacy laws. It’s necessary to check your state’s banned debt collection rules, as they may differ between regions. In Victoria, for example, it’s also against the law for a debt collector to:
- Refuse to leave a house or office when asked.
- Threaten to expose the individual.
- Incite fear by presenting documents as though they’re official even though they’re not.
- Communicate false consequences and ‘what if’ scenarios.
- Contact an individual who is under 18 years old.
How to report a debt collector’s illegal activity
If you feel that a debt collector has broken the law, lodge a report to the Australian Competition and Consumer Commission (ACCC). It’s worth reading up on the Debt Collection Guidelines and Dealing with Debt Collectors resources to better understand your situation.
The ACCC and ASIC use ‘flexible, fair and realistic’ in their language describing debt collection practices. Failing to repay debt might be the outcome of financial hardship, an illness, or a job loss. It could also be related to poor financial literacy, economic circumstances, and mental health challenges.
Defaulting on a debt is a complex situation and should be treated with care. This includes the way you treat yourself during this time.
How to handle a debt collector
Respecting yourself means being honest about your financial situation, not putting your head in the sand, and responding to a debt collector as soon as possible.
- Check the information they have is correct. Review your options and agree to a payment plan, making sure you understand the terms. Tell the collector how you’d like to be contacted in the future.
- Always be honest. Know your numbers. Talk to your partner or a family member about your situation, so you have support and accountability. Maintain good financial records and put repayment dates in your calendar.
- Document all communication between you and the debt collector. Mark down the date and time of contact, how they reached out, their full name, the agency or company, and what was discussed and agreed on. Request the agreement in writing. Always ask to see everything in writing before making a decision.
- Talk to directly to your creditor. Inform them on the conversation and the repayment agreement. Cover all your bases. Spend some time reflecting on what went wrong and how you can avoid this happening again.
How to avoid dealing with a debt collector
Just like the old health adage, ‘prevention is the best cure’, the same school of thought applies to your finances. If you’re over your head in debt, seek help before it gets worse.
Contact your credit provider (bank or lender) and discuss your options. Apply for a hardship variation and pay as much as you can afford. Speak to a financial counsellor on the National Debt Helpline. Get legal advice at an agency in your state.
You’re better off reaching out for help before you really need it – as you start to feel the pinch. There might be strategies available to you now, so you never have to face a debt collector.
What’s most important is knowing you’re not alone in this. It’s noble, not shameful, to ask for help.
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