Creditors: What they can and can’t do when collecting a debt

by The FindLaw Team

There may be unfortunate instances where a person may have to deal with creditors or debt collectors. If facing such a situation, readers should be aware that there are legal limits as to how a creditor or debt collector can act when collecting a debt, and which this piece will cover.

Creditors must not engage in unconscionable or unfair conduct

If a person has a disability, vulnerability or special disadvantage, debt collectors cannot engage in conduct that is unconscionable or unfair. Therefore, a debt collector cannot take advantage of the condition of a person or their circumstances in a manner that affects their ability to ascertain what is in their best interests.

A person should only be contacted for a reasonable purpose

Creditors can only contact a debtor for a reasonable purpose, such as demanding payment or to discuss alternative payment arrangements. A debt collector cannot harass or physically threaten a debtor, nor can they contact the person more than necessary, or at unreasonable hours. Additionally, creditors cannot make contact with other people without the permission of the debtor. Under both the Competition and Consumer Act 2010 (Cth) and State and Territory fair trading Acts, a creditor cannot unduly harass a debtor.

Creditors cannot make false statements

When collecting debts, creditors cannot make false statements, such as the debtor’s house will be taken away from them for example. Additionally, creditors cannot engage in behaviour that is misleading, such as sending letters of demand that look like court documents for example.

If creditors are engaged in behaviour that is unfair or illegal, there are a number of options that a person can take such as:

  • contacting the Australian Securities and Investments Commission (ASIC) if the debt is in relation to loan repayments;
  • contacting the Australian Competition and Consumer Commission (ACCC) if the debt is not related to a loan;
  • contacting the relevant State or Territory Fair Trading body;
  • the police.

Debtors also have the option of initiating legal action for damages if they have suffered loss due to the actions of creditors.


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