Know your rights to safeguard yourself from litigation
Dealing with debt can be a stressful process. There can be confusion around what your rights are and what you’re allowed to own during a commercial debt collection. There are no simple answers to these questions but debt shouldn’t be an open invitation for businesses and individuals to take advantage of you.
The more you understand about your rights during a commercial debt collection, the more chances you have to protect yourself and the assets you own. As some of your business’s assets are being obtained by a debt collector, it’s important to understand what legal rights they have too. When both parties have a clear understanding of their rights during this situation, the whole process can run smoothly without the need for further legal action or court proceedings.
So for today’s blog article, we’re covering all the key information you should know about a commercial debt collection. We’re covering the rights of the debt collector and yourself in order to demystify the whole process.
What is commercial debt collection?
Commercial debt collection is the process of collecting agreed goods and services promised by another business in a signed contract or agreement. When these goods and services are not delivered to a creditor they must be paid by the debtor. The debt collection process is used to pay back whatever the debtor owes to the creditor.
What is a commercial debt collector?
A commercial debt collector generally falls under three categories; an individual collecting debts on behalf of the business they own or the company they work for. A commercial debt collector can also be an individual working on behalf of a debt collection agency.
A debt collector may be tasked with collecting or requesting the payment of debts owed to another business. A debt collector can also be tasked with repossessing goods or property other than real estate in order to pay off the debts your business owes.
Across Australia, commercial debt collection agencies must be licenced before carrying out any debt collections on the behalf of their clients. There are no obligations on how a debt collector is required to act during a commercial debt collection. It’s for these reasons that people in debt can be open to being taken advantage of.
When you owe money, a creditor may try to collect the debt themselves. They may also try to engage a debt collector to recover the debt for them. In this scenario, a creditor may also sell your debt to a debt collector.
What are debt collectors allowed to do?
During a commercial debt collection, a debt collector should respect your privacy. They are permitted to contact you. The most common form of contact is usually via phone. A debt collector is allowed to contact you for the following reasons:
- Asking for payment of the debt
- Offering to settle or set up a payment plan
- Asking why you haven’t met the deadline for an agreed payment plan
- Reviewing your agreed payment plan after an agreed period of time
- To advise you on what will happen if you don’t pay your debt
- To repossess goods you owe money on after previous steps have been taken
How will a debt collector contact me?
There are some restrictions on how and when a debt collector can get in touch with you to discuss a commercial debt collection. As a general rule, debt collectors shouldn’t call you outside of the hours between 7:30 am and 9 pm on weekdays. For weekends, they are only allowed to call you between 9 am and 9 pm.
When it comes to how often a debt collector contacts you, it should not be more than 3 times a week or 10 times a month. They are not permitted to call you on a national public holiday either. For a commercial debt collection, a face to face meeting is usually considered a last option if you haven’t responded to phone calls or other communication methods. Face to face meetings are permitted between the hours of 9 am and 9 pm on any day.
In some cases, a debt collector may try to get in touch with you via email or social media. This form of communication should only be used if the debt collector is reasonably sure you are the only one using the account. There shouldn’t be anyone else sharing the account with you who can access these messages between you and the debt collector.
What debt collectors aren’t allowed to do
There are still limits to what a debt collector can do during commercial collections. You have every right to legally challenge a debt collector if they decide to unlawfully request money from you or obtain assets. Current laws in Victoria outline the following things that a debt collector is strictly prohibited from doing.
- Trespassing on your property
- Using overbearing tactics or abusive language
- Harassing or trying to contact you at unreasonable times
- Misleading or deceiving you during the debt collection process
- Taking unfair advantage of you because of illness, disability, age, illiteracy
- Discussing your debt with someone else without your permission
How to deal with a debt collector
There are certain measures and actions you can take if you feel that a debt collector is being unreasonable. For example, if a debt collector threatens violence or physical force, you should contact the police immediately.
When a debt collector is harassing or intimidating you, there are official letters you can send to them to request they stop immediately. The Financial Rights Legal Centre has a template of this letter you can fill out.
If a debt collector continues to repeat their actions of violence, abuse, and harassment then you have every right to contact the Australian Financial Complaints Authority (AFCA). You can file complaints to this authority and get a free, independent dispute resolution.
What you should do during a commercial debt collection
To avoid costly outcomes like litigation, it’s vital to act responsibly during a debt collection process. By being cooperative and responsible during this process you safeguard yourself from further issues. It will be your responsibility to do the following;
- Be honest about your financial situation
- Promptly reply to all calls and letters
- Agree to a payment plan if your business can afford it
- Update your debt collector if any contact details change
To protect yourself and your business from further legal issues try keeping a record of all communications with the debt collector. Take notes of the dates and times you contact the debt collector. Record the name of the debt collector and the company they work for. Keep notes of how they contacted you. Was it in person, by phone, letter, email, or text? Try and record the minutes of the meeting.
Get more legal advice on commercial debt collection
At P&B Law, we offer expert legal advice for all matters to do with businesses. Still unsure about your legal rights during a debt collection? Get in touch with one of our legal representatives that specialise in business law in Australia.
We can guide you through the complexities of a commercial collections and ensure you’re not being taken advantage of. With the right legal advice, we can help ensure that you or your business are safeguarded from litigation.