Have you received a call from a debt collector? Are you worried they will turn up on your doorstep tomorrow and demand collection of your debt? If you’ve missed a repayment on your credit card or home loan due to circumstances out of your control, the last thing you want is to have ongoing phone calls from a debt collector demanding money you don’t have. This can feel like harassment and make an incredibly stressful situation even worse.
While dealing with an overdue debt can be overwhelming, it’s much easier to manage when you understand the process involved. If you’re being contacted by a debt collector and unsure of what they’re allowed to do, our ultimate guide will go through everything you need to know about debt collectors and the best way to deal with them.
What is a Debt Collector?
A debt collector is a person or an agency who regularly collects debts owed to others when they are overdue. Debt collectors can include a creditor, service provider or debt collection agency. Some providers and banks have their own internal debt collection teams, whereas others may pass the debts onto a third-party debt collection company. A debt collector can contact you as soon as you have an outstanding debt. They may repeatedly call you on an unknown or private number until you pick up the phone. They can contact you to:
- Make a demand for payment of a debt,
- Make an arrangement for repayment,
- Find out why an agreed repayment plan has not been met,
- Review a repayment plan after an agreed period of time, and
- Inspect or recover mortgaged goods.
Fortunately, the Government has strict recommendations around how often a debt collector can contact you.
What are Debt Collectors Allowed to do?
To seek recovery of your debts, debt collectors are allowed to contact you by phone, letter, email, social media or by visiting you in person. However, there are limitations on when they can contact you and the number of times they can do so.
By Phone
- Debt collectors cannot call you more than 3 times in a week.
- Can only call you between 7.30am – 9.00pm on weekdays and 9.00am – 9.00pm on weekends.
In Person
- A debt collector is only allowed face-to-face contact with you between the hours of 9.00am – 9.00pm weekdays and weekends.
- Visiting you at your home should only take place if repayment arrangements cannot be worked out with you over the phone or by email.
- Face-to-face contact is usually agreed upon with you, unless you’ve failed to respond to other attempts of contact.
Social Media or Email
- Debt collectors can only use these methods of communication if they are reasonably sure the account is not shared.
On public holidays, debt collectors are not allowed to contact you at all. If you’re facing debt stress and are having to deal with a debt collector, it’s important for you to keep a record of all communications with them. This includes the date, time and point of contact.
Although debt collectors are allowed to contact you, there are debt collection laws which they must adhere to.
What are They Not Allowed to do?
Debt collectors fall under the Commonwealth consumer protection laws, including the Australian Consumer Law (ACL), the Australian Securities and Investments Commission Act 2001 and the National Consumer Credit Protection Act 2009. These protection laws mean debt collectors aren’t allowed to:
- Use any physical force or coercion,
- Harass you to an unreasonable point,
- Provide you with misleading information, make false statements or try to deceive you in any way,
- Trespass on your property, threaten or intimidate you,
- Verbally abuse you, or
- Take unfair advantage over any kind of vulnerability or disability.
If you encounter any prohibited behaviour from a debt collector, it’s essential to know the steps you can take to protect yourself.
For immediate threats or the use of physical force, contact the police right away for your safety. For other forms of misconduct like harassment, discomfort, misinformation, or any actions that violate your rights, begin by addressing the issue directly with the debt collector through a written request to cease their improper conduct. You can utilise templates provided by the Financial Rights Legal Centre to craft your message.
Should these actions not resolve the situation, or if you feel your concerns are not being adequately addressed, contact the Australian Financial Complaints Authority (AFCA). Filing a complaint with AFCA allows you to seek free, independent dispute resolution, ensuring that your case is heard and that appropriate measures are taken against the debt collector’s misconduct.
Are Debt Collectors Allowed to Contact Family Members?
By law, a debt collector is not allowed to threaten or use physical force of any kind towards you, any member of your family or a third party connected to you to try and collect your debt. They can, however, contact a family member, friend of third party to obtain location information on you. During this contact, they aren’t allowed to reveal they are a debt collector or provide any information about your financial situation to another person without your permission.
A debt collector can speak about your debt with your lawyer or spouse, but no one else. If they reveal anything about your debt to anyone else without your permission, they are in breach of your consumer rights. When a debt collector conducts a face-to-face visit, they must respect your right to privacy in front of family members, friends and third parties (such as your neighbours).
Can Debt Collectors Charge You Interest?
Having a debt collector chasing you is stressful enough, but when they tack on extra interest rates and fees the situation takes a turn for the worse. Fortunately, a debt collector is not allowed to charge you interest and fees that aren’t a part of the original debt. Debt collectors can, however, charge you for the interest and fees outlined in your original debt contract. For example, if your original contract didn’t include a late payment fee, the debt collector is not allowed to add one on.
This rule helps prevent debt collectors from being too demanding, as they can’t raise interest rates and fees just because you don’t answer the phone. They are also not allowed to double or triple the amount of debt you owe them just because they think it’s the right decision. A debt collector must follow the rules outlined in your original contract, but unfortunately, it doesn’t mean you can ignore them and hope they disappear.
What Happens if You Ignore Debt Collectors?
If a debt collector is hounding you and you know you don’t have the money to pay off your debts, you may be tempted to ignore the debt collector altogether and hope they leave you alone. However, ignoring debt collectors will lead to consequences, so it’s best if you don’t ignore them. These consequences include:
- The debt collector will continue to call you and get in touch however they can, which includes face-to-face visits at your home,
- Your credit rating will be greatly impacted, making it difficult for you to apply for any further credit,
- Your debt will likely grow,
- You will have missed out on an opportunity to settle the debt, and
- The debt collector may file a lawsuit against you if you continue to ignore their calls and letters.
It’s always better for you to focus on settling your debt rather than ignoring the debt collector’s attempts at getting into contact with you.
What’s the Best Way to Deal with Debt Collectors?
Being in debt and having to deal with debt collectors can become a frustrating and stressful experience, but there are steps you can take to make the process easier. If a debt collector gets in contact with you, you should:
- Be cooperative but make sure they’re following the law and being respectful in their encounters with you,
- Be honest about your debt and your financial situation, and
- Respond to their correspondence in a timely manner.
How We Can Help
If you are feeling overwhelmed by your debt and feeling harassed by debt collector calls, then an easy option to stop the calls is to enlist the help of a debt solutions company. They’ll be able to arrange a personalised financial solution between you and your creditors without you needing to talk to any of them. They take over all communication with creditors meaning communication from debt collectors will cease immediately. Our partners Revive Financial provides a range of solutions to cover any debt situation you may be in. We know how stressful debt can be and we are here to take the stress away, not add to it. Get in touch with them for a free consultation and get back to living your life debt-free.
A tax refund can also help clear your debt of course. Accountants Direct is Australia’s favourite national tax agent. Book here to do your tax or call us on 1300 TAX SHOP (1300 829 746)
