Tuesday 21 Feb 2017

Concerns with Centrelink’s Private Debt Collectors’ Accountability

By: Srikaran Nadador

Since the introduction of the government’s new automated debt recovery system in July 2016, there has been severe public backlash against the inaccurate system of data-matching which has affected over 170,000 people to date.

Financial Counsellors may be interested to know that Centrelink has enlisted private debt collectors, including Dun & Bradstreet and Recoveries Corp, to recover the alleged overpayments.

The website is reporting that debt collection agencies have been engaged by Centrelink to pursue alleged overpayments. One former Centrelink recipient stated in a news article that she was bullied by debt collection agency Dun and Bradstreet into repaying $2524 to Centrelink after allegedly being threatened with legal action and a criminal record if she refused to pay.

It is useful to remember that private debt collectors are required to comply with the ACCC and ASIC’s Debt Collection Guidelines. Centrelink are not required to comply with these guidelines.

Provided below is a list of ASIC/ACCC Debt Collection Guidelines that Financial Counsellors can consider when dealing with a client being pursued by a debt collector:

  • Debt Collectors must not misrepresent their identity and/or authority either by implying or stating that they work for a solicitor, government official or an independent complaints body.
  • If a debtor says they can’t repay their debt, then debt collectors should make reasonable enquiries into their financial position to determine if the person can make meaningful and sustainable repayments. If they can’t, debt collectors should be referring them to a financial counsellor.
  • Debt Collectors must not engage in unnecessary and unduly frequent contact designed to frighten, intimidate, mislead, demoralise or tire out the debtor. This type of excessive communication may amount to undue harassment of a debtor.
  • A Financial Counsellor can be an authorised representative of a debtor and can represent them or advocate on their behalf. Debt Collectors are advised to stop contacting the debtor directly, except in certain circumstances, if the debtor is represented.
  • Where a person has requested information or documentation, failure to provide it by the debt collector amounts to misleading or deceptive conduct or unconscionable conduct. All collection activity should be suspended until all requested documents have been provided, except in the case of an undisputed amount.
  • Debt Collectors are entitled to explain the consequences of a non-payment of their debt obligations, but are not to mislead the debtor as to nature of the consequences or about the legal process.

It is important to recognise that these guidelines provide further protection to debtors along with the Commonwealth Consumer Protection Laws.

Additionally, debt collectors pursuing these debts in Victoria are also required to comply with the Debt Collection provisions in the Australian Consumer Law & Fair Trading Act 2012 (FTA) (Vic). Section 45 of the FTA provides a list of the prohibited debt collection practices and section 52 affirms that it is an offence to charge a debtor for the cost of debt collection. For instance, section 45(2)(h) prohibits someone from impersonating an employee or agent of the Commonwealth and section 45(2)(k) prohibits false or misleading representations in connection with the extent of a debt; or the method of recovering a debt.

The Debt Collection guidelines provide additional guidance to debt collectors, like those involved in the Centrelink saga, to act in accordance with fair and ethical standards. It is evident that the actions of private debt collection agencies continue to be at odds with the type of conduct expected. Interested stakeholders are able to put forth a submission to a Senate Inquiry on the matter until 22 March 2017.

Srikaran Nadador is a volunteer at Consumer Action Law Centre.