The Federal Court has ordered A&M Group Pty Ltd, which trades as Debt Negotiators, pay a penalty of $650,000 after finding that it engaged in misleading or deceptive conduct and in undue harassment or coercion against debtors who had missed payments under their debt agreements.
A&M Group is a debt agreement administrator who collects payments from debtors to distribute to creditors.
ASIC Deputy Chair Sarah Court said ‘A&M Group’s treatment of consumers who may have fallen behind on the repayments of their debt agreement was unacceptable. Threats that included that a consumer could be imprisoned or that they would contact the consumer’s family or work colleagues unless the debt was paid should never be made. ASIC was determined to take this case to court to show that this conduct was predatory and in breach of the law’.
ASIC alleged, and A&M Group admitted, that it sent text messages, emails and made telephone calls to six separate debtors where it made statements that were untrue, including that:
- the debtors could be charged with fraud and imprisoned if they failed to make payments;
- creditors were in the process of terminating the debtors' debt agreements and were considering legal action;
- if their debt agreement was terminated and they were forced into bankruptcy, the debtors’ finances would be examined to determine if they had been able to make payments under their debt agreement; and/or
- if creditors obtained a garnishee order (a court order to allow a creditor to recover debt directly from a debtor's bank account or from their wages), the creditors would be entitled to take 80% of the debtor’s income.
The Court found that this conduct was misleading or deceptive, in breach of s 12DA of the ASIC Act.
The Court also found A&M Group contacted, or threatened to contact, the friends, family and work colleagues of the six debtors, with the intention of embarrassing or intimidating the debtors in order to get them to contact A&M Group. This conduct, together with the untrue statements made by A&M Group, was unduly harassing or coercive, in breach of s12DJ of the ASIC Act.
‘ASIC understands the pressure consumers feel when they are in debt and need to make repayments. This type of unduly harassing or coercive behaviour by A&M was unacceptable and would have added to the difficulties and stress experienced by these consumers. ASIC will continue to take action to protect financially vulnerable consumers,’ concluded Ms Court.
Prior to the final hearing, A&M Group admitted liability for the contraventions and consented to the declarations sought by ASIC. It also implemented substantial remedial changes to address the contravening conduct. The Court considered these were important considerations in reducing the level of penalty required for deterrence.
Justice Bromwich stated that the penalty represented the absolute minimum for ‘such predatory and flagrant conduct without going against the dominant consideration of general deterrence. This should be treated as a caution to other commercial debt administrators. The message to them, to put it bluntly, is that if they engage in such contravening conduct, and do not admit to the contravening conduct at the first opportunity without taking any remedial steps, the penalty that will be imposed will be well in excess of any minimum provided by statute.
‘All participants in the business of administering registered debt agreements must be given the clearest and most forceful incentive not to behave in this way. It must be viewed by those industry participants as simply not being worth the candle to do so,’ Justice Bromwich continued.
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Background
A debt agreement (also known as a Part IX debt agreement) is a formal way for a debtor to settle their debts with creditors. A&M Group, which trades as Debt Negotiators, acts as a registered debt agreement administrator. ASIC’s investigation arose from a referral by the Australian Financial Security Authority to ASIC.