Debt collectors

Contributed by Ian Macdonald and Andrea Highman and current to 1 September 2005

DEBT COLLECTION FEES

Debt collectors (otherwise known as mercantile agents) are generally paid a commission by the creditor for any amounts collected on their behalf. Debt collectors may also purchase debts from creditors. This involves the creditor assigning their right to collect the debt to the debt collector in return for a payment which is less than the full amount of the debt. The debt collector then pursues the debtor, and any amount collected above the purchase price becomes the debt collector’s income.

A licensed debt collection agency can charge a fee to the debtor only where the debtor enters into an arrangement of regular repayment instalments. The maximum amount the debt collector can charge is equal to two and a half percent of the debt. A debtor is not otherwise obliged to pay any other costs unless and until a judgment has been entered against them following the issue of a summons (see below).

DEBTOR HARASSMENT

If a debtor is being harassed by a debt collector, she or he should complain to the Commissioner of Police and/or to the Ministry of Fair Trading. The Commissioner of Police is empowered under the Debt Collectors Licensing Act 1964 (WA) to summons a licensed debt collector to Court to show cause why their licence should not be cancelled on the grounds that they are not a fit and proper person to be a licensee. The types of harassment which may be considered sufficiently serious for a debt collector to lose their licence in Western Australia include such things as leaving the debt collector’s car at or outside the debtor’s home or workplace, sending the debtor letters threatening to leave embarrassing documents, making unreasonably frequent phone calls, or other conduct that tends to embarrass or intimidate or ridicule the debtor.

Under s.60 of the Trade Practices Act 1974 (Cth) and s.23 of the Fair Trading Act 1987 (WA) it is a criminal offence for a debt collection agency or a creditor to harass a consumer at his or her home. As well, a person who has suffered a loss through harassment – for example, loss of reputation – can sue the agency or creditor for damages (Trade Practices Act ss.60, 82).

Credit reporting agencies provide services to businesses informing them of the financial history of potential customers. There are several credit reporting agencies in Western Australia, many operated by debt collecting firms including Dunn and Bradstreet (Australia) Pty Ltd.

But by far the largest credit reporting agency is Baycorp Advantage, a business that has taken over the role previously performed by the Credit Reference Association of Australia. Baycorp Advantage collects information on millions of individuals and businesses in Australia, as well as in New Zealand and Asia.

CREDIT RATINGS

There is no such thing as a “credit rating”; consumers are not given a score out of ten. Some credit providers assess an application for credit using an internal scoring system but this score is not made public and is not listed on a person’s credit file.

INFORMATION CONTAINED IN A CREDIT FILE

The consumer’s (debtor’s) file does not necessarily reflect the consumer’s present financial position, but tends to be a diary of events, listing such things as credit enquiries, (usually indicating that an application for credit has been made), defaults, repossessions and dishonoured cheques.

A credit provider can list a report on the debtor’s record if the debt is over $100.00 and more than 60 days overdue. Telecommunication and utility debts such as water and power bills can be recorded if at least $20.00 is overdue.

While some information is collected from court records such as judgments or bankruptcy,most of the information relies on accurate reports by creditors.

HOW THE SYSTEM OPERATES

A consumer’s file is opened the first time a credit provider or creditor provides information to the credit reporting agency about the debtor. It contains the consumer’s full name, date of birth, address, driver’s licence number, employment history and spouse’s name. These details are used to identify the file for future enquiries or reports. Spouses have separate files.

Credit providers can make an inquiry by telephone or via computer terminals and each inquiry is listed on the consumer’s file. Unless a subsequent report is made, there is nothing to indicate whether credit was granted or refused, but members making inquiries in the future will be able to contact other creditors listed on the report for further details about the consumer.

PRIVACY ISSUES

The Privacy Act 1988 (Cth) provides safeguards for individuals in relation to consumer credit reporting. These are outlined in Chapter 33: PRIVACY RIGHTS.

HOW LONG DO RECORDS REMAIN?

Personal data remain for the life of the file. Reports such as court judgments, defaults (even if subsequently paid), credit inquiries and re-possessions remain on file for five years. Records of bankruptcy remain on file for seven years.

Information on a debtor who cannot be located despite reasonable attempts is kept for seven years. This is referred to as ‘clearout’ information.

GETTING A COPY OF THE FILE

A consumer should periodically obtain a copy of their file to ensure its accuracy. They should also view their file if they have been rejected credit due to a negative report that the consumer was unaware of, or if any identity documents have been recently stolen.

Consumers may obtain a free copy of their file from Baycorp Advantage by using their 10 working day service. Charges apply for faster processing.

Baycorp Advantage’s contact details are provided at the end of this chapter.

To obtain his or her credit file the consumer will need to provide the following information:

• full name;
• date of birth;
• driver’s licence number;
• current residential address;
• previous addresses if the consumer has moved in the last five years;
• current employer or a previous employer;
• a daytime telephone number; and
• signature.

AMENDING A FILE

Unless the original information is incorrect, subsequent action by the debtor cannot alter the report. Bringing payments up to date, or paying the debt in full can only lead to that additional information being added to the file, not a cancellation of the previous record.

Incorrect information about a default can be amended by contacting the credit provider advising them of the error and demanding they contact Baycorp Advantage to amend it. If this does not occur within a reasonable time period, the debtor can contact Baycorp Advantage directly for assistance. Personal identifying information and information on the public record such as information about court judgments or bankruptcy can be amended by contacting Baycorp Advantage directly and completing a File Update Form.

DEBT COLLECTORS

DEBT COLLECTION FEES

Debt collectors (otherwise known as mercantile agents) are generally paid a commission by the creditor for any amounts collected on their behalf. Debt collectors may also purchase debts from creditors. This involves the creditor assigning their right to collect the debt to the debt collector in return for a payment which is less than the full amount of the debt. The debt collector then pursues the debtor, and any amount collected above the purchase price becomes the debt collector’s income.

A licensed debt collection agency can charge a fee to the debtor only where the debtor enters into an arrangement of regular repayment instalments. The maximum amount the debt collector can charge is equal to two and a half percent of the debt. A debtor is not otherwise obliged to pay any other costs unless and until a judgment has been entered against them following the issue of a summons (see below).

DEBTOR HARASSMENT

If a debtor is being harassed by a debt collector, she or he should complain to the Commissioner of Police and/or to the Ministry of Fair Trading. The Commissioner of Police is empowered under the Debt Collectors Licensing Act 1964 (WA) to summons a licensed debt collector to Court to show cause why their licence should not be cancelled on the grounds that they are not a fit and proper person to be a licensee. The types of harassment which may be considered sufficiently serious for a debt collector to lose their licence in Western Australia include such things as leaving the debt collector’s car at or outside the debtor’s home or workplace, sending the debtor letters threatening to leave embarrassing documents, making unreasonably frequent phone calls, or other conduct that tends to embarrass or intimidate or ridicule the debtor.

Under s.60 of the Trade Practices Act 1974 (Cth) and s.23 of the Fair Trading Act 1987 (WA) it is a criminal offence for a debt collection agency or a creditor to harass a consumer at his or her home. As well, a person who has suffered a loss through harassment – for example, loss of reputation – can sue the agency or creditor for damages (Trade Practices Act ss.60, 82).