Better redress and procedures for debtors in relation to factored debt will ensue following the Australian Competition and Consumer Commission's inquiries into complaints about Alliance Factoring's debt collection practices and procedures.
Debt factoring is where a debt collection company will purchase debts owed to third parties to collect on its own account.
The ACCC was concerned that Alliance had engaged in misleading and deceptive conduct and undue harassment and coercion in relation to its debt collection practices in attempting to recover Telstra debts it purchased in 2002 and 2003.
After the ACCC raised its concerns that Alliance's conduct may breach the Trade Practices Act 1974, Alliance reviewed the issues raised and practices adopted by the company. It subsequently offered court enforceable undertakings to the ACCC. As part of the undertaking Alliance has agreed to:
- establish a 1300 hotline for 12 months in which complainants can lodge a dispute in relation to money paid to Alliance where the complainant claims the money was not owed; and/or disputes liability; or where a default listing has resulted from debt which the complainant claims was not owed.
Where Alliance is reasonably satisfied a debt was not owed it will:- refund the money paid;
- remove the default listing; and
- reimburse the alleged debtor's legal costs.
- Alliance will advertise this process in all metropolitan newspapers. In addition, Alliance will advise key financial advisers and State Fair Trading offices of this process.
Alliance has also agreed to:
- sponsor a two day forum for the debt collection industry
- review its existing compliance program/implement a trade practices law compliance program
- review its complaints handling procedure
- review its standard form letters
- review of call guides
- produce a written policy for handling of bankrupt debts, and
- cause an independent review of its compliance program, once a year for three years.
"The undertaking will correct the offending behaviour, minimise the risk of recurrence, undo past wrongs and inform or educate consumers and the industry", ACCC Chairman, Mr Graeme Samuel, said today. "The undertaking will redress or remove the risk of future harm to vulnerable and disadvantaged consumers." Debt collection issues are of a concern to the ACCC generally. The detriment suffered by many consumers as a result of poor debt collection practices is often severe, affecting a consumer's emotional and physical wellbeing and ability to obtain future finance. The scope of the undertaking and the serious and considered response by Alliance demonstrate a solid review of its practices and procedures. This gives credence to Alliance's advice that it was using this process to refine and improve on procedures already underway to address its belief that the debt collection industry is one where the sale of debt and its collection require a cultural change and greater transparency".
It appeared the conduct of concern arose from a number of factors, including:
- the age of some of the debts and the level of information provided to alleged debtors, making it difficult for them to determine whether the debt was theirs, and/or whether the debt had been paid or otherwise dealt with
- Alliance's systems were also unable to readily and accurately determine whether particular debts had been the subject of bankruptcy proceedings or whether legal proceedings to recover the alleged debt may have become statute barred, and
- alleged debtors had difficulty in resolving disputes with Alliance because of a lack of clear complaints handling procedures.
Complaints received included allegations that alleged debtors were harassed by the frequency with which Alliance contacted them by mail, telephone and/or text message (SMS); contacted alleged debtors at work when they had requested Alliance not do so; and used threatening and on some occasions abusive language.
The ACCC also considered Alliance may have inappropriately listed debts that were in dispute with a credit reporting agency. In some cases it appears Alliance indicated that an alleged debt would be listed as a default on the consumer's credit file unless the alleged debt was paid when, in some cases, the debt had already been listed as a default.
In accepting a court enforceable undertaking from Alliance, the ACCC took into consideration Alliance's full cooperation with its inquiries and Alliance's initiatives with respect to its compliance prior to the ACCC's inquiries, including:
- articulating and communicating its compliance policy to collection agents
- introducing mandatory compliance training for collection agents
- introducing performance measurement criteria for collection agents based on compliance
- improving controls in relation to its business processes, and
- improving its complaints handling procedure.