Are Your Letters of Demand Misleading or Deceptive?

Despite the threat of high fines for debt collectors who breach the Competition and Consumer Act, letters of demand that amount to misleading and deceptive conduct are still being sent to debtors, according to the Legal Practitioners’ Liability Committee (LPLC) in Victoria.

Convictions, civil orders and fines of up to $220,000 for individuals and $1.1 million for corporations can apply when the harassment and coercion provisions of the Competition and Consumer Act are breached, or when there is a conviction for knowingly making false or misleading representations.

Brett Turnbull, Solicitor Director/National Practice Manager of Mason Black Lawyers says the LPLC’s warning to its members related both to demand for the debt and demand for costs.

“All companies which recover debts need to closely monitor the content and tone of their collectors’ verbal and written communications,” Brett says. “Any communication that is calculated to mislead or intimidate a debtor or which grossly overstates the creditor’s entitlements could put a company in breach of the Act”.

The Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) have very clear and easy to read information in the Debt Collection guideline for collectors and creditors, which all collectors, correspondence templates and call centre scripts should adhere to.

Particular areas of concern include:

  • Undue harassment (unduly frequent contact designed to wear down or exhaust a debtor. The guideline recommends not exceeding three contacts a week, or 10 per month.)
  • Inaccurate representations about the frequency of contact (stating that numerous previous contact attempts have been made, when this is not true)
  • The debtor’s liability or the amount owing (including claiming an amount that does not account for payments that have already been made, or collection charges and fees which the creditor could not actually claim).

The Debt Collection guideline for collectors and creditors can be downloaded from the ACCC’s website:

Recoveriescorp strictly adheres to this guideline regarding contact with debtors, record keeping, legal action and privacy obligations. It is kept up to date with changes to its legal obligations by Mason Black Lawyers, who also oversee Recoveriescorp’s training for collections staff.