How to deal with debt collectors amid the cost of living crunch

As Australia’s cost of living crisis escalates, more households will find themselves facing debt collectors. Here’s how to handle it.

Bills are getting tougher to pay as the surging cost of living combines with painful interest rate rises, and some Australians will inevitably find themselves dealing with debt collectors.

Insolvency specialists say it is far better to speak up early if you have problems paying bills, as many organisations have teams to help with hardship support before an issue escalates.

But if a debt collector does approach you, it’s wise to know some strategies to deal with it.

Oracle Insolvency Services partner Yulia Petrenko says being chased by debt collectors can be stressful, and people should know they have legal rights and protections.

“Debt collection is not how it is portrayed in some movies,” she says.

“It is a tightly regulated industry. It is illegal for a debt collector to threaten or use physical force against you and your family, or damage your property. This behaviour should immediately be reported to the police.

“They are not allowed to verbally abuse and deceive you or unreasonably harass or hassle you.”

Oracle Insolvency Services partner Yulia Petrenko says debt collection is tightly regulated.

Australian Competition and Consumer Commission guidelines say debt collectors must respect your right to privacy but they can contact you to ask for payment, offer to settle or make payment plans, question why you haven’t met agreed payments, review payment plans and inform you what happens if you don’t pay.

They can also repossess goods that you owe money on “as long as they’ve been through the correct process”.

Petrenko says debt collectors can visit your home or work if they cannot make payment arrangements by letter, email or phone.

“There are strict rules about the time they can visit your home or work and they must leave immediately if you ask them to do so,” she says.

“They also are not allowed to discuss your financial situation with another person without your permission “so, if they show up to your workplace, they cannot tell your boss why they are there.”

Petrenko says if dealing with a debt collector:

• Ask for proof that the debt is yours.

• Thoroughly check all documents.

• Negotiate a realistic payment plan.

• Do not ignore the debt collector.

• Keep a record of all interactions.

“If you disagree with the amount demanded … you have the right to dispute the debt but it is important to seek professional help immediately,” she says.

“Our advice is to negotiate with your creditors before it’s too late. It is difficult to make a hardship application after debt collectors have become involved, so it is vital you don’t bury your head in the sand when financial trouble starts.”

Jodie Bedoya, director of debt collection training company eMatrix, says many organisations have specialist hardship teams trained to help you before a small bill escalates.

“Don’t be embarrassed either – they do it all day and their role is not to judge,” she says.

Bedoya says debt collectors may be able to offer you a lump-sum payment to settle a debt.

“You can negotiate, so ask,” she says.

“A collector’s job is to understand your capacity to pay – so be ready to answer some questions around what is happening for you that you can’t pay.

Debt collectors must not use overbearing tactics or abusive language.

“If it is all too much – have someone call for you and give them authority to talk on your behalf, that’s OK too.”

Bedoya says people should not overcommit to unrealistic repayments “because the follow up calls or SMSs will stress you out more when you miss payments”.

“Try to keep your calm – firing up on staff won’t get you a better outcome, it will just cause you more stress,” she says.

“Remember too, on the other side, they have a hard job, so talking to someone and helping them out might just make their day.”

WHAT DEBT COLLECTORS CAN’T DO

By law, debt collectors must not:

• Trespass on your property.

• Use overbearing tactics or abusive language.

• Harass or contact you at unreasonable times or more than is needed.

• Mislead or deceive you.

• Take unfair advantage of you because of illness, disability, age, illiteracy, or lack of understanding of the law.

• Discuss your debt with someone else without your permission.

Source: MoneySmart, ACCC