The Australian debt collection industry is one of the most fully developed and tightly regulated in the world. The advantage that consumers, businesses, and other industry participants get from this is that when they deal with the debt collection industry, then can have the peace of mind that comes with knowing that there are industry and legal protections in place that protect their rights.
This is especially important because of the sensitive and at times emotional nature of dealing with bills and financial liabilities.
But to really get an accurate picture of the industry a regular “health check” is required. And that is exactly what the independently commissioned report by the consumer watchdog, the ACCC, titled “Research into the Australian Debt Collection Industry” aims to do.
So what are the key findings?
Australians and Tech Leaders
Innovative businesses, and ways of doing business, have long been a hallmark of Australians. There has been plenty of evidence of this over the years, including popular shows like The New Inventors and Shark Tank.
The report found that larger, more sophisticated debt collection agencies had put in place effective reporting methods to automate the debt collection process. This included building in safeguards against inappropriate contact attempts for debtors and to ensure compliance with legislation.
It also found that smaller companies without the resources to automate these processes invested more heavily in training and creating a compliance culture to ensure their employees were adequately skilled.
All Debt Isn’t Created Equal
On a balance sheet, all debt looks the same, as an ugly number next to the “bad and doubtful debts” item. But the report showed that there is a clear difference between credit regulated debt and non-credit debt. Credit regulated debt includes those bills issued by the energy, phone and internet businesses.
For smaller businesses, this suggests that credit checks can be a very valuable resource, as the scores issued by these companies as a result of past bill compliance can feed into credit scores, giving future customers an idea of their likelihood to pay future bills.
Business Type Creates Debt
The report also found that businesses that operate in industries with fast-rising costs are much more likely to face debt collection problems. Those sectors most at risk include those that work alongside the electricity sector, such as electrical businesses, as well as industries that are vulnerable to falls in consumer spending like pay TV and outdoor landscaping.
Standard Terms Help
Whether it’s buying your groceries or a new car, clear labelling and communication is something that every consumer values. The report found that those agencies with simple, upfront, and standard terms and conditions were more likely to get good outcomes for their clients without imposing additional stress on those they were collecting from.
Red tape, regulation and the imposition of rules are some of the most common irritants for business owners and managers. But the report found that increased regulation and law has led to a huge improvement in the behaviour and conduct of the debt collection industry in Australia.
In particular, the Australian Credit License and external dispute resolution functions were found to be driving stronger outcomes for all. The report also found that the increased costs of regulation and compliance had meant that more dubious and “cowboy” style operators had been forced out of the market, allowing the stronger debt collection agencies to grow while also offering better service.
The report was also clear in its finding that regulators and consumer advocates like the ACCC were ready and able to undertake compliance action if they received complaints and evidence of illegal or improper practices.
The result is a better experience for both creditors and debtors, with less stress and hardship for both parties.
If you’d like to hear more about how the locally owned and operated Challenge Collections service can help you or your business collect your unpaid bills and improve your cash flow, just give us a call today on (07) 3808 7001, or email us https://challengecollections.com.au/contact-us/. We look forward to working alongside you.