Collection house makes ex-gratia payments for collection of 'old debts' in NSW
Australia's largest debt collection company, Collection House Limited, will offer ex gratia payments in aggregate totalling up to $660,000 to a group of approximately 500 New South Wales debtors from whom it collected 'old debts' between 2001 and 2004.
The payments come after discussions with the Australian Competition and Consumer Commission and Collection House about a tranche of former Australian Guarantee Corporation Limited debts bought by Collection House and its subsidiary, Lion Finance Pty Ltd, in 2001.
The ACCC first notified Collection House in January 2001 of its concerns about representations made to debtors about certain debt in NSW. In particular the ACCC was concerned about representations made by Collection House regarding its rights to collect 'old debts' that were potentially extinguished.
'Old debts' are those where a period prescribed in State and Territory based statutes of limitation (usually six years) has lapsed without any recovery action.
In all States and Territories, statutes of limitation provide a defence against litigation for recovery of the debt after that specified period. However, NSW law goes further and extinguishes the debt at the conclusion of the statute period but allows for it to be revived by the courts in some circumstances.
"The ACCC is aware that legal opinion is divided on the effect of this NSW law", ACCC Chairman, Mr Graeme Samuel, said today.
"The ACCC maintains that regardless of a creditor having a potential further right of access to the courts, the Trade Practices Act 1974 precludes the creditor from misleading consumers about their rights when pursuing the debt in the meantime by claiming or suggesting it is entitled to the outstanding monies".
Mr Samuel said that the ACCC would continue to press debt collectors and creditors generally not to mislead consumers as to their rights in regard to statute-barred debt in all States and Territories.
Both the ACCC and Collection House sought legal advice on interpretation of the Limitation Act 1969 (NSW) and, as result of negotiations, the board of Collection House volunteered to make ex-gratia payments in relation to all accounts identified as being potentially statute extinguished at the time of collection activity.