Debt collection can be an unpleasant, but sometimes unavoidable part of owning or operating a small business, medium sized enterprise, or even a national business organisation.
The ability to get paid on time is crucial to cashflow, and not having debts collected as they fall due can result in undesirable knock-on effects, such as deferrals in investments, delays in paying your own creditors, and the wasting of your valuable time in chasing up money that you have already earned.
But despite the unpleasant feelings that can arise from having to spend time chasing debts, it is important to remember there may be perfectly legitimate reasons that your invoices have not been paid on time.
It is also important to remember that because of the heightened emotion, financial commitments, and sensitivity around unpaid debts, there are numerous Commonwealth laws that set out the rights and obligations of creditors and debtors.
Contacting A Debtor
The basic principle in the legislation regarding making contact with a debtor is that it must only be done for a reasonable purpose, and to the extent necessary to achieve that purpose.
For example, in a simple case, it may be necessary to contact a debtor in order to provide them with “on the record” information about their outstanding payment, and to make a demand for payment.
Where the case is less simple, and it is a second or third contact, a reasonable purpose to call may be to offer a more flexible repayment agreement.
A creditor is also allowed to explain to a debtor the consequences of their failure to make a payment in accordance with the demand or previous demands. These can include legal remedies or withdrawal of the service provided. However, it is important to tread with caution in this area. Any conduct that can be perceived as bullying tactics or harassment can result in severe penalties under consumer protection legislation.
Contacting a debtor should also be an opportunity to exchange information, not just impart a one-way demand for payment. For example, if you are contacting a debtor for late payment and they make it clear that they have no way to have the funds paid immediately, but can make payment in two weeks time, that is a good piece of information to build on.
Options for the creditor, after receiving that information, include arranging for a follow up call after those two weeks, issuing a letter acknowledging the conversation and the new terms or simply establishing a more friendly relationship with the debtor.
It is clear that unreasonable demands for payment or aggressive behaviour will be more likely to result in further delays or non-payment. This is a common pitfall when businesses and individuals attempt to recoup their own debts, as they find it harder to be totally objective.
However, bear in mind that the law does provide creditors with the right to ask debtors why payment was not made according to the original arrangements, or why the debtor has been unresponsive to previous communications.
Times and Dates
The law sets out prescribed reasonable contact times that must be followed when contacting debtors. If dealing with a debtor who lives interstate, it’s important to remember to convert the time into their local time.
For contact via phone, between 7:30am and 9:00pm is acceptable on weekdays, with the time moving to 9:00am to 9:00pm on weekends. For face to face contact, 9:00am to 9:00pm are the allowed times.
If contacting a debtor at their place of work, you are permitted to contact them during their regular work hours if you know those, or between 9am and 5pm otherwise. No contact recommended on any public holidays for any of the above methods of contact.
No article about debt collection would be complete without the warnings about behavior that is clearly illegal in the eyes of the law.
As might be expected, any use of physical force is prohibited, and likely to end up with a criminal charge along with an unpaid bill. Coercion, or the act of forcing a person or a third party do something against their will is also completely out of the question.
Harassing behaviours like calling debtors repeatedly at unsociable hours or leaving unreasonable amounts of messages are also not allowed. Harassment is determined on a case by case basis, so there is no “magic number” of times that a behaviour may be committed before it is deemed harassment.
The test is what a reasonable person might deem appropriate in the circumstances, and if in doubt, it is always better to err on the side of caution.
Using half-truths, deceptive or misleading tactics to compel payment of a bill or outstanding invoice can also be illegal, regardless of the intention of the person making the claims.
Finally, unconscionable conduct is also illegal. This action can include taking advantage of any vulnerability that the debtor is under, such as a limited ability to understand the demands (because of a language or intellectual barrier) or a disability.
As you can see, there are many rules and regulations that have been put in place to try and balance the interests of debtors and consumers when it comes to debt collection.
To have your debt collection taken care of by an experienced, professional debt collection agency based in Brisbane, we encourage you to give us a call at Challenge Collections. We specialise in debt recovery and providing peace of mind to our clients so they can get on with their business.