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No business wants to spend money trying to recover an outstanding debt. It’s time consuming and frustrating to chase money that someone owes you. In many cases, creditors will do whatever they can to try and recover an outstanding debt before escalating the matter to a debt recovery specialist. However, it is important to maintain certain standards when contacting and dealing with debtors, their representatives or third parties like family members. This article will explain debt harassment and what not to do when trying to recover a debt.
Physical Force, Undue Harassment and Coercion
When recovering a debt, you must not use physical force, undue harassment or coercion. So what conduct falls within these categories?
Physical Force
While it might sound obvious, you cannot use any type of physical force when trying to recover a debt. This extends to threats of physical force. Physical force and threats of physical force can amount to a criminal offence.
Undue Harassment
Undue harassment refers to excessive or unjustified contact with a debtor. But what is excessive or unjustified conduct?
It is expected that a debtor will be approached several times to request the payment of the debt. This is not considered harassment. However, if you intend to intimidate, demoralise or exhaust a debtor with these approaches, it could amount to undue harassment. The debtor may feel this way because of the frequency or nature of the communication.
For example, unnecessary repeated contact without giving the debtor enough time to respond will be considered undue harassment.
The Australian Competition and Consumer Commission (ACCC) has published recommendations suggesting that contacting a debtor more than three times per week or 10 times per month will likely be considered undue harassment.
Coercion
Coercion refers to the practice of pressuring someone or using force to restrict their ability to make choices or take certain actions. This could be actual or threatened force or pressure. For example, representations which are calculated to force or compel a debtor to make payment can be considered undue coercion. Unlike undue harassment, the offensive behaviour does not have to be repetitive for it to be coercion.
Misleading or Deceptive Conduct
In addition, you must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. The phrase “in trade or commerce”refers to activities in the course of a business. This term is very broad, and includes debt recovery activities that companies undertake.
Misleading and deceptive conduct refers to acts in a business context which cause a person to:
- believe what is actually false; or
- be led astray or into error when making a decision.
A debt collector who threatens litigation as a way to recover debts may be engaging in misleading and deceptive conduct. It will be misleading or deceptive where the vast majority of debts do not in fact progress to litigation in those circumstances. Therefore, this type of representation is likely to mislead or deceive the debtor into believing that legal proceedings are likely or going to occur.
Unconscionable Conduct
When attempting to recover a debt, you must not engage in unconscionable conduct. Unconscionable conduct commonly occurs where one party knowingly takes advantage of a special disadvantage of the other party.
A special disadvantage can include a debtor’s:
- age;
- lack of education;
- inability to speak English; or
- a mental or physical impairment.
If you know or even suspect that a debtor lacks knowledge of the law or the debt recovery process, you must not take advantage of that lack of knowledge when trying to recover your debt.
For example, a creditor who threatens legal proceedings to recover payment will be guilty of unconscionable conduct if the creditor knows that the time limit to pursue the debt has expired.
Key Takeaways
Overall, it is clear that you cannot recover a debt by ‘any means necessary’. You must act honestly and reasonably. However, you can, and should, be clear and firm on your demands. If you talk to a debtor over the phone, it is important to take notes of what you discuss.
If you need any help or advice about recovering a debt, contact LegalVision’s debt recovery lawyers on 1300 544 755 or fill out the form on this page.
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