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12-261MR Federal Court finds debt collection group misled and harassed debtors
The Federal Court of Australia has found one of Australia’s largest debt collection companies, ACM Group Limited, harassed and coerced debtors and engaged in 'widespread' and 'systemic' misleading and deceptive conduct when recovering money.
In May 2011, ASIC brought proceedings alleging that ACM contravened the Australian Securities and Investments Commission Act when dealing with eight debtors between November 2008 and June 2010 (refer: 11-107AD).
ASIC presented to the Court 96 phone calls, mostly between ACM debt collectors and the debtors, and the ACM debt collector training manual that was in use at the relevant time as evidence of ACM’s conduct. The Court found, ‘the manual made it very plain that debtors should be threatened with litigation’.
The Court found several instances of undue harassment or coercion, including:
repeated threats to inform a debtors’s husband about her indebtedness in circumstances where her husband did not know about her debt and ACM knew that she did not want him to know about her debt
threats to call a debtor’s friends and employer until the debt was repaid
threats to have Sheriff’s officers attend a debtor's home or place of employment in a marked car
telephone calls to neighbours and friends of a debtor
a threat to issue a warrant for a debtor’s arrest
a threat to take action that would result in a debtor’s taxi licence being revoked, and
a threat to take action that would result in a debtor being unable to travel overseas.
The Court described the tone of one of ACM’s supervisors as ‘rude, condescending and vicious, no description of this call (and some of her later efforts) can adequately capture the offensiveness involved’.
The Court found ACM persistently misled debtors by implying that:
ACM was a firm which specialised in commencing legal proceedings for the recovery of debts (when it was not)
ACM frequently commenced legal proceedings (when it did not)
debtors had been referred to ACM’s lawyers for the purpose of commencing legal proceedings (when they had not)
ACM had decided to commence legal proceedings against debtors (when it had not)
legal proceedings, including bankruptcy proceedings, would be commenced immediately (when they would not), and
ACM would cause NSW Sheriff’s officers to attend a debtor’s home to serve documents (when no papers had yet been prepared).
In the judgment the Court found the misleading and deceptive conduct was widespread.
‘[T]he constant references to litigation were not an accident. They were the intended outcome of a house manual which promoted threatening litigation as a means to achieving recoveries. The operators were told to make references to legal proceedings and lawyers and it is only natural that this is what they did. For example, many faithfully drew on the imagery, referred to in the manual, of the uniformed Sheriff’s officer arriving in a marked car. What occurred was not just widespread, it was systemic,’ the Court found.
ASIC Commissioner Peter Kell said ASIC was committed to ensuring debt collectors operate professionally and efficiently, and consumers who find themselves in a difficult position financially can be confident they will be dealt with fairly and lawfully.
‘ASIC will not tolerate behaviour designed to intimidate and mislead debtors. This includes cases where the debtor's family, friends and associates are also threatened with unreasonable behaviour,’ Mr Kell said.
The Court concluded that declarations of misconduct and injunctive relief, restraining ACM from future similar conduct, be granted.
ACM purchases debt ledgers predominantly of credit card, personal loan overdraft debt and telecommunications accounts from financial institutions and telecommunications companies then seeks to negotiate repayment programs with the relevant debtors.
Guidance for debt collectors and creditors can be found in the joint publication by ASIC and the ACCC, Regulatory Guide 96 Debt collection guideline: for collectors and creditors (RG 96). Details about dealing with debt collectors can be found on ASIC’s Moneysmart website.
On 23 November 2012 the Court made final orders by declaring that between 24 November 2008 and 21 June 2010 ACM had engaged in misleading and deceptive conduct and undue harassment and coercion in relation to eight debtors, in breach of the ASIC Act. The court also ordered that ACM be restrained from engaging in misleading and deceptive conduct and undue harassment and coercion in the future and that these orders operate permanently. ACM was ordered to pay ASIC's costs.