Why you need to be careful about outsourcing debt collection: Court finds agency harassed and misled debtors

The Federal Court has found one of Australia’s largest debt collection agencies harassed debtors and engaged in widespread and systemic misleading and deceptive conduct in chasing debts, including “rude, condescending and vicious” calls and threats of imprisonment.

The court finding followed an investigation into the agency, Accounts Control Management Services, by the Australian Securities and Investment Commission.

ASIC presented to the court 96 phone calls and the ACM debt collector training manual, which the court found “made it very plain that debtors should be threatened with litigation”.

ACM’s clients include Telstra, the National Australia Bank and the Commonwealth Bank.

The court found ACM had engaged in repeated threats to inform a debtor’s husband about her debt in circumstances where her husband did not know about it and ACM knew that she did not want him to know about her debt.

The debt collection agency also made threats to call a debtor’s friends and employer until the debt was repaid, made threats to have Sheriff’s officers attend a debtor’s home or place of employment in a marked car and made telephone calls to neighbours and friends of a debtor.

ACM made a threat to issue a warrant for a debtor’s arrest and a threat to take action that would result in a debtor being unable to travel overseas.

The court was scathing in its description of the tone of one of ACM’s supervisors as “rude, condescending and vicious, no description of this call (and some of her later efforts) can adequately capture the offensiveness involved”.

It found ACM persistently misled debtors by implying that it was a firm which specialised in commencing legal proceedings for the recovery of debts and that it frequently commenced legal proceedings.

“The constant references to litigation were not an accident. They were the intended outcome of a house manual which promoted threatening litigation as a means to achieving recoveries,” the court found.

“The operators were told to make references to legal proceedings and lawyers and it is only natural that this is what they did.”

The court awarded declarations of misconduct and injunctive relief which restrain ACM from future similar conduct.

ASIC Commissioner Peter Kell said ASIC will not tolerate behaviour designed to intimidate and mislead debtors.

“This includes cases where the debtor’s family, friends and associates are also threatened with unreasonable behaviour,” Kell said.

Sally Scott, partner at law firm Hall & Wilcox, told SmartCompany the case makes it clear that businesses need to be aware that they can’t engage in misleading and deceptive conduct themselves or engage debt collecting agencies which mislead and deceive.

“Businesses need to be aware of businesses that they are engaging to do things on their behalf,” she says.

“If businesses that they engage mislead consumers then it is possible that the initial company can be caught for the misleading behaviour of the company that they engage.”

Scott says she is aware that most debt collection agencies have guidelines for the staff that do the collecting but whether or not that is enough and whether the staff have training is another issue.

Sometimes debt collectors work for businesses directly but often what the agencies do is purchase the debts themselves, which Scott says places more pressure on them to mislead and deceive.

“The other problem with debt collecting agencies is even those with sufficient training and policies also have key performance indicators so the staff that make the calls may be told not to make threats or to mislead but they are given KPIs and if they don’t meet them their job is at risk or they do not make the money they expect,” Scott says.

“This is the problem with businesses, if they have a disconnect between their policies and their incentives” she says.

SmartCompany contacted ACM but did not receive a response before publication.

 

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