Service providers are responsible for the debt collection conduct and practices of their in-house debt collection staff or third party collectors such as debt buyers. The service provider is also responsible for ensuring that it does not commence debt collection or sell the debt to a third party if the debt is being disputed by the consumer.
In addition, service providers are required to cease debt collection activity if the debt is genuinely disputed by the consumer or if the TIO is investigating the debt as part of a complaint. These obligations are reflected in the Telecommunications Consumer Protection Code, and in the TIO’s position statements.
The complaints that we receive about debt collection practices in the telecommunications industry present in one or more of the following ways:
- the consumer claims they are contacted by a collections agent demanding payment of a debt despite having paid the debt, disputing the debt with their provider or not being aware of the debt
- the consumer claims that the collections agent may act in a harassing or threatening manner, including threatening legal action, where the consumer feels forced to pay the debt even though they dispute it
- the consumer claims that they are willing to pay the debt but the debt collector has refused to accept a reasonable payment arrangement and instead demanded a lump sum payment which the consumer cannot afford
- the consumer claims to have been default listed over the telecommunications debt, even though they disputed it or paid the debt , and
- the debt collector continues to pursue collection of the debt even after the service provider has recalled the debt, which suggests a lack of clear processes or communication between service providers and debt collectors.
For example, in 2010-11, we recorded 5,430 new complaint issues about collections agents continuing to pursue payment of a debt despite being advised that it is in dispute. This is an increase of 2.2 per cent in the previous years, and follows a 33.3 per cent increase in 2009-10. We also recorded 494 issues about collections agents using harsh, harassing or otherwise offensive methods to recover payment of a telecommunications debt. This is an increase of 42.8 from 2009-10.
Although the number of new complaints about these issues is small in comparison to other types of complaints, the impact on consumers can be significant.
For example, if a consumer does not pay a debt within 60 days, the service provider or debt collector can have a default listed on the consumer’s credit file. A credit default can have a negative effect on the consumer’s ability to apply for future credit, which can extend to contracting a new phone service, applying for a credit card, or applying for car or home loan.
The impact of financial hardship on mental health has been well documented in research conducted in Australia. Continuous calls from debt collectors can add considerable stress on consumers.
Our research into debt collections practices informed our submission to the Debt Collection Harmonisation Regulation options paper. The paper, proposed by the Consumer Affairs Forum (formerly the Ministerial Council on Consumer Affairs), seeks to understand the current models for credit regulation that exist in different States and Territories in order to develop a consistent regulation for debt collection in Australia by December 2012.
Our submission highlights the importance of:
- compliance and enforcement mechanisms for any codes of conduct relating to debt collection activities
- effective internal and external complaint handling and dispute resolution mechanisms, and
- education and training of debt collectors to increase the awareness of the impact of their activities on consumers.
- telecommunications service providers should not take credit management action (including debt collection) on genuinely disputed amounts which are unresolved or under investigation by the service provider, the TIO or relevant agency
- the methods of debt collectors acting on behalf of service providers cannot be harsh, unconscionable, constitute undue harassment or otherwise be unlawful, disreputable or offensive
- providers are required to ensure that its debt collectors comply with professional and ethical standards for collection of debts and that these agents have complaint handling processes that are consistent with the Australian Standard on Complaint Handling and the Credit Reporting Code of Conduct, and
- service providers must ensure that debts sold or assigned to third parties do not involve unresolved issues or disputed amounts.