Debt collection guideline: for collectors and creditors

13. If liability is disputed

  1. Collection activity (including credit report listing) should be suspended if a person contacted about a debt claims that:
    • they are not the alleged debtor
    • the debt was never incurred, or
    • the debt has been paid or otherwise settled
    and you have not already confirmed their identity and liability.
  2. If collection activity is continued without properly investigating claims that a debt is not owed, including whether a debt is statute-barred, there is considerable risk of breaching the law.


  1. If you are considering assigning a debt, and the debt is in dispute, you should think carefully about providing additional information to the assignee.

Identity of debtor is disputed

  1. A person must not be pursued for a debt unless there are reasonable grounds for asserting that the person is liable for the debt.

Example: Take reasonable steps to ensure that the person contacted is the alleged debtor

You should not send letters requesting payment or alleging a debt is owed to a person or group of persons who may only share a name or surname with the person who incurred the debt. Doing so can be stressful for a person who is not the alleged debtor and may be misleading or deceptive.

  1. Reasonable steps should be taken to ensure that the person contacted or attempting to be contacted is the alleged debtor. If the identity of the debtor cannot be established with sufficient certainty (because they deny their identity and you do not have any other supporting evidence to the contrary) all contact with that person should cease. Failure to do so may risk breaching the Privacy Act. See part 2, section 8, Privacy obligations to the debtor and third parties.

Quantum of or liability for a debt is disputed

  1. If the debtor’s liability for the debt cannot be established when challenged, collection activity should cease. A letter to the debtor should be considered advising that collection activity has ceased and the circumstances (if any) in which collection activity may be resumed in the future.
  2. It is misleading to state or imply that the debtor must prove they are not liable for the debt. In legal proceedings, proof of the debt lies with the person alleging the debt is owed to them.
  3. If the parties are unable to resolve a dispute about liability for a debt or the amount owed, you may have an obligation to advise the debtor of internal or external dispute resolution processes available—see further under part 2, sections 22, Resolving debtor complaints and disputes and 24, The role of independent external dispute resolution schemes.
  4. Subject to the next paragraph, further communication with a debtor, after the debtor has clearly denied liability and/or stated an intention to defend any legal proceedings brought against them, is not appropriate. In these circumstances, you have the option of starting legal proceedings if you choose to pursue the debt.
  5. However, further communication in writing may be appropriate after a denial of liability:
    • to clarify the basis of the creditor’s or collector’s claim and the consequences of legal action being taken
    • to advise the debtor of the creditor’s or collector’s intention to start legal proceedings, and the steps involved
    • to put a genuine proposal to the debtor for settlement of the debt.
      Further communication is also appropriate when it is subsequently authorised or requested by the debtor.
  6. Further communication with the debtor about any other debt, or any part of a debt that is not denied remains appropriate.
  7. If a court judgment is obtained for a debt for which liability had been denied, you are entitled to start or resume communication with the debtor for that judgment debt (assuming the judgment has not been set aside).