ASIC/ACCC GUIDELINES REFRESHER THE HIDDEN PERILS 01 Presented by Jody Wright LL.B Compliance & Contracts Manager IDS Group

02 WHAT IS THE CODE? The ASIC/ACCC Debt Collection Guideline for Collectors and Creditors. Explains how Commonwealth Consumer Protection laws apply to debt collection. Practical tips and remedies for breaches. NB. THE GUIDELINE DOES NOT HAVE LEGAL FORCE HOWEVER THE COURTS WILL REFER TO THE GUIDELINES TO DETERMINE IF THERE HAS BEEN HARRASSMENT OR MISLEADING OR DECEPTIVE CONDUCT IF A CLAIM IS MADE

WHO DOES IT APPLY TO? 03 Collectors Creditors Liability on the part of Creditors for the acts of Agents retained to collect debts. In-house collection activities (including those within government departments 03

Relevant Legislation 04 The Guideline refers to the following legislation predominantly: Parts IV and V of the Trade Practices Act; Commonwealth Privacy Laws; State and Territory Fair Trading legislation; Uniform Consumer Credit Code; and Bankruptcy Act There is other legislation referred to and this is listed in Appendix B of the Guideline

Does it Apply to Court Recovery Processes? 05 The short answer is no. The guideline is mainly concerned with non court debt recovery processes and informal collection activities after judgement has been obtained. It does not limit a creditor’s right to conduct repossessions or enforcement of other legitimate legal interests, to seek and obtain judgement and pre-judgement remedies, to enforce judgements through court processses and to undertake all necessary procedures associated with these actions including service of documents.

Recent Cases in Australia 06

ACCC v Pippa Sampson 07 ACCC has brought proceedings against Sampson (a lawyer with the firm Goddard Elliott) for misleading and deceptive conduct when representing a video store for recoveries. ACCC alleges that Sampson made misleading and deceptive representations in 4 debt collection letters and notices posted to addressees. The matter is still to go before the Court and the ACCC is seeking declarations, injunctions, corrective advertising and the implementation of a trade practices law compliance program. It is also seeking costs against Sampson.

ACCC v ANZ Bank 08 The ACCC is investigating the collection practices of the ANZ Bank. The allegations raised are that the Bank’s collection department has engaged in misleading and deceptive conduct in relation to debts and has also been involved in harrassment of debtors by breaching the ACCC guidelines. Breaches included phone harrassment and inappropriate issuing of legal threats and default notices to debtors who had already agreed to make repayment or face financial hardship.

Complaints against the NAB. 09 A debt collection Agency contracted to the National Australia Bank allegedly has used overblown threats of legal action, and engaged in deliberate misinformation and phone harrassment. This conduct plus the conduct of the ANZ Bank and apparently 2 other major banks has prompted calls for better oversight and regulation of the debt collection industry generally.

The United Kingdom 10 Conduct of banks is not confined to Australia. UK banks are harrassing debtors in defiance of court orders and official rules. In one case the Bank of Scotland pleaded guilty to contempt of court for contacting a debtor in breach of an order. The bank had previously called him 319 times in one year after he slipped behind in payments on a £5000 loan.

UK Example Not Limited to Banks 11 Private Debt collection agencies and Bailiffs in the UK are also using underhanded (yet often legal) tactics. Apparently the tactics being used are so aggressive that many groups are calling for legislation to curb the excesses. The downturn in the economy has lead to a significant increase in consumers experiencing debt repayment problems and the use of debt collection agents and Bailiffs is on the rise.

United States Examples 12

11 th Circuit Court of Appeals Case 13 A US Court determined that a debt collector could not defend itself by saying it acted in good faith when it intentionally violated one requirement of the Fair Debt Collection Practices Act so that it would not run afoul of another provision. The collector, Niagara Credit Solutions Inc. argued it broke the rule saying debt collectors must identify themselves and tell a debtor they are calling to collect a debt in order that it could comply with a rule barring debt collectors from communicating about the debt with third parties (such as a roommate who might hear an answering machine message from a collector).

14 California Case A California Court has ruled that almost a million consumers who were victims of an overly aggressive debt collector are eligible to participate in a class action against a private debt collection agency (who had a contract with local prosecutors). They would send out letters on official prosecutors stationery threatening consumers who had written bad cheques with criminal prosecution or jail unless collection fees were paid. Many consumers were threatened with criminal charges even though no prosecutor had reviewed the cases and the collector had no authority to make such threats.

15 ICICI Bank, India’s largest private sector lender, got a rap on the knuckles from a consumer affairs commission, which ordered it to pay a fine of 5 million rupees (approximately $128,000) after a client who defaulted on a loan complained of violence by the bank’s recovery agents. The Delhi Consumer Commission also ordered the bank to pay the complainant, Tapan Bose, 500,000 rupees ($12,738.85) compensation. He alleged the recovery agents impounded his vehicle and beat a friend’s son with iron rods, mistaking him as the defaulter. Apparently thuggish behaviour by debt collectors in India is highly prevalent and banks use these type of collectors. Indian Case

16 Based on case examples in Australia and overseas it is clear that it is prudent to adopt the ACCC guidelines when collecting debt. Doing so will limit the likelihood of a successful claim being made against you. It will also help to avoid further regulation being implemented which may lead to a situation similar to the US where creditors and debt collection agencies institute proceedings as a first step. NB. Penalties for breaches can be as far reaching as fines of up to $220,000 for an individual and $1.1 million for a corporation. Aggrieved debtors can be awarded compensation. Closing Comments

QUESTIONS?