According to the Reserve Bank, each Australian owes an average of $74,000 in debt repayments. To put that number is perspective, Australians have more personal debts than what the nation earns in a year as a whole in its GDP. Inevitably, with the sheer amount of people in debt, problems with debt collectors will arise. So it’s useful to understand what a person’s rights and responsibilities are when dealing with debts.
How is a demand of payment made?
The first stage of collecting a debt is when a letter of demand is made to someone who owes a creditor money. Letters of demand usually have a date where payment must be made or court action will be taken. It is important to note, that in s 4 of the Unauthorised Documents Act in New South Wales, it is illegal for a debt collector to send a letter for demand of payment that looks like a court document. Furthermore, in most circumstances, it is against the law for debt collecting agencies to make demands for additional costs on top of the debt from the creditors. If any of the aforementioned actions have occurred, please seek legal advice.
When must a debt be collected?
If no court order exists in collecting a debt, the creditor has six years to enforce payment. In the event that a creditor has not sued for payment, the debt can no longer be collected. However, when confirmation is made by an individual to the creditor that there is a debt by either making a payment, or signing a written agreement, the six year limitation period begins again.
Disputing a debt
There may be circumstances where an individual has either paid off the debt, and the creditor is still seeking payment, or when there has been an error, and they don’t owe the money that is being requested. In such an occurrence, an application to the Consumer, Trader and Tenancy Tribunal can be made in New South Wales, or a case can be heard in the Magistrates Court in Queensland or Victoria. When a debt is in excess of a certain amount, than a higher court shall hear the case in each of the States.
Harassing behaviour from a debt collector
Debt collectors under the various State and Federal Acts are required to behave in a manner that is reasonable, and not take advantage of a person’s disability or behaving in a manner that is unfair. It is also an offence to physically threaten, or make misleading statements in regards to what may happen if the debt is not paid. If any of the above has occurred, seek legal advice on the options available to your circumstance.
Initiating court proceedings is an expensive exercise and is usually the last resort. Most States will encourage the debtor, and their creditor to seek alternative means to resolve their dispute. Especially when the amounts in question are relatively small. However, when a creditor makes a service of claim, this signifies that they have decided to take court action against an individual. Service must be made personally to the person in debt, or any adult who is living with, or who is working with the person in debt. If the service of claim is never acknowledged, a creditor can seek a default judgement in their favour, ordering an individual to pay the debt.
For any person who is in trouble with debt, seek legal advice to your individual situation.