Debt collection is a topic that often sparks confusion and anxiety among individuals in Australia. It’s understandable as our services are used when someone has not paid for something.
However, while our services may be to do with unpaid monies, we’re not a mystery force to be reckoned with. Due to numerous myths and misconceptions surrounding the debt collection process, we think it is essential to separate fact from fiction.
In this article, we will shed light on the various myths of debt collection in Australia, and hopefully help to remove some of the fear you may have of debt collectors.
6 Common Debt Collection Myths
While there are countless debt collection myths out there, we’ve chosen 6 of the ones that we as debt collectors hear the most.
Myth #1: Debt collectors can arrest or imprison you.
One of the most persistent myths is the fear that debt collectors possess the authority to arrest or imprison debtors. However, in Australia, this myth is entirely unfounded.
Debt collection agencies do not have the power to arrest individuals or issue imprisonment orders. Debt collection is a civil matter and is regulated by the Australian Consumer Law (ACL) and the Australian Securities and Investments Commission (ASIC).
The purpose of debt collection is to facilitate the repayment of outstanding debts, not to incarcerate debtors. Often, as part of our role, we will work closely with debtors to work out how they may be able to repay their debts rather than punish them.
Myth #2: Debt collectors can take your property without notice.
Another common myth is that debt collectors can seize your property without warning. Consider this myth busted because debt collectors cannot take possession of your assets without following the proper legal procedures.
They must obtain a court order or a warrant before any property can be seized. Even then, there are restrictions on what can be seized, with certain essential items being exempt from collection, such as basic household goods. These exemptions are designed to ensure that individuals maintain a basic standard of living while repaying their debts.
Myth #3: Debt collectors can harass or intimidate you.
While debt collectors have the right to contact you to discuss your debt, they must do so in a fair and respectful manner.
Australian laws, including the ACL and ASIC guidelines, prohibit debt collectors from using harassment or intimidation tactics. They are not allowed to contact you excessively, at unreasonable hours, or disclose details of your debt to third parties without your consent.
If you experience harassment or intimidation from a debt collector, you have the right to lodge a complaint with the Australian Financial Complaints Authority (AFCA). AFCA serves as an independent dispute resolution body that can assist in resolving complaints related to debt collection practices.
Myth #4: Paying a small amount will restart the statute of limitations.
The statute of limitations refers to the time within which a creditor can take legal action to recover a debt. A prevalent myth is that making a small payment toward a debt will restart the statute of limitations, extending the time creditors have to pursue repayment.
However, this is not the case in Australia. The statute of limitations is generally calculated from the date of the last activity or acknowledgement of the debt. Making a partial payment does not restart the clock; it merely reduces the outstanding balance. It’s important to note that the statute of limitations can vary depending on the type of debt and the specific laws of each Australian state or territory.
Myth #5: Debt collectors can contact your friends and family to collect payment.
Privacy is a significant concern for individuals in debt, and there is a misconception that debt collectors can freely contact your friends and family to collect payment.
However, under the Privacy Act 1988, debt collectors are generally not permitted to disclose your personal information or discuss your debt with anyone other than yourself, your spouse, or your legal representative. They can only contact third parties to obtain your contact details or to confirm your whereabouts. Debt collectors are required to respect your privacy and adhere to strict confidentiality guidelines.
Myth #6: Debt collectors charge huge recovery fees
It’s not uncommon for people to avoid using the services of a debt collector because they don’t want to get slugged with huge service fees. While our services do cost money, it’s usually a percentage of the amount that is recovered which may go up incrementally as the size of the recovered debt increases.
On top of this, it’s very common for debt collectors to charge on a “no recovery, no fee” basis, so if they do not successfully recover the debts then they won’t charge any fees. It may differ from debt collection business to debt collection business, but if you’re considering using their services, don’t let the costs put you off from at least getting in touch.
Debt collectors ain’t that bad
Debt collection can be a complex and stressful experience, but it is crucial to separate the facts from the myths. Understanding your rights as a debtor in Australia is essential in navigating the debt collection process effectively. Remember that debt collectors cannot arrest you, seize your property without legal procedures, harass or intimidate you, or freely disclose your debt to others. By debunking these common myths, we hope to empower individuals with accurate information and alleviate some of the anxiety associated with debt collection. It is always advisable to seek professional advice or consult relevant authorities if you have concerns or questions regarding your specific debt situation.
Do you need assistance with debt collection?
If you’re looking for a debt collector to help your small to medium sized business here in Australia, at JMA Credit Control, we can help you. Our services are available Australia-wide and throughout any industry.
We will work with you to recover debts effectively and by following all of Australia’s strict regulations. You can depend on JMA Credit Control for thorough debt collection.
