ACCC warns businesses using debt collectors to be careful

Above: This debt collector has an offer you can’t refuse.

The Australian Competition and Consumer Commission has warned businesses using debt collectors they may be held responsible for the debt collectors’ actions in a report published last week.

The report, titled Research into the Australian Debt Collection Industry, found while there have been improvements in debt collection practices across Australia, problem areas remain.

Read more: Why you need to be careful about outsourcing debt collection – Court finds agency harassed and misled debtors

The report found over 500 businesses offer some form of debt collection service in Australia and collectors make up to 65 million contact attempts each year.

Issues of particular concern identified in the report include:

• Some debt collectors not abiding by the ACCC’s guidelines and the law causing considerable detriment to vulnerable and disadvantaged consumers;
• Credit repair businesses which can charge consumers large fees –sometimes larger than the debts involved – for support that is freely available to them from other agencies such as industry ombudsman schemes and financial counsellors;
• Debt collection processes that impose additional costs that can add to the detriment for consumers already in financial distress.

ACCC deputy chair Delia Rickard said in a statement accompanying the report that businesses engaging debt collectors may be held responsible for their agent’s collection activities even where the agent acts in a way that is contrary to their debt collection agreement.

“Many in the industry clearly take their compliance obligations seriously and are committed to improving their reputation,” Rickard said.

“However, this report shows there is room for further improvement.”

Patrick Coghlan, commercial director at CreditorWatch, told SmartCompany the debt collectors he has dealt with have been very diligent and have followed the rules.

“I think over the years there have been a few bad apples that have spoilt the bunch,” he says.

Coghlan says professional debt collection agencies can be a helpful tool for SMEs.

“A lot of small businesses forget that a sale isn’t a sale until you have the money in your account,” he says.

“The average time it takes SMEs to get paid is pushing 50 plus days at the moment.  A professional credit management debt collector will be able to collect the money a lot quicker than you do so you can focus on your business.”

Coghlan’s advice for small businesses engaging debt collectors is to ensure the debt collector has all the appropriate licensing in place and to look at their office location.

“A debt collection agency is easy to run out of a home office but in order to have the proper processes in place you really want to ensure they are who they say they are and they are a legitimate business,” he says.

“Look at testimonials if they are available.”