Debt collection guideline: for collectors and creditors

2. Contact for a reasonable purpose only

  1. Communications with the debtor must always be for a reasonable purpose, and should only occur to the extent necessary.6
  2. It may be necessary and reasonable for you to contact a debtor to:
    • provide information to the debtor about their account
    • make a demand for payment
    • offer to work with the debtor to reach a flexible repayment arrangement
    • accurately explain the consequences of non-payment, including any legal remedies available to the collector/creditor, and any service restrictions that may apply in the case of utilities (for example, disconnection of electricity or gas supply or restriction of water supply)
    • make arrangements for repayment of a debt
    • put a settlement proposal or alternative payment arrangement to the debtor
    • review existing arrangements after an agreed period
    • ascertain why earlier attempts to contact the debtor have not been responded to within a reasonable period, if this is the case
    • ascertain why an agreed repayment arrangement has not been complied with, if this is the case
    • investigate whether the debtor has changed their residential location without informing you, when there are grounds for believing this has occurred
    • sight, inspect or recover a security interest
    • or for other similar purposes.7

You may also contact a debtor at the debtor’s request.

  1. What constitutes a reasonable purpose may change according to the personal characteristics of an individual debtor. You should consider the information you have about each individual debtor in order to determine whether intended contact with that debtor will be for a reasonable purpose.

Example: Debtor’s financial situation

If you are aware that a debtor is unable to make meaningful and sustainable repayments towards a debt, then continuing to contact the debtor to demand payment will not be reasonable or appropriate. Where that is the case, you should only consider contacting the debtor if you know, or have good reason to think it is likely, that the debtor’s financial situation has improved.

There are many reasons a debtor may be unable to make meaningful repayments towards a debt, including where they are:

  • on a limited fixed income (whether on a temporary basis or for the foreseeable future, for example, with an aged pension)
  • unemployed
  • suffering significant, chronic or long-term illness or injury
  • incarcerated.
  1. There may be circumstances where contact is made for a reasonable purpose, or contact is made initially for a reasonable purpose, and yet other relevant considerations mean the contact becomes unreasonable or unacceptable.8 Relevant considerations may include the debtor’s mental illness or intellectual disability, or the debtor’s incarceration.

Example: Contact for reasonable purpose

If you make contact with a debtor in order to convey a demand for payment it may be contact for a reasonable purpose. However, if the debtor disputes liability and requests proof of the alleged debt, and you continue to pursue that person without properly investigating the claims, then this will not be contact for a reasonable purpose.

Example: Negotiating a repayment arrangement

If contact is made with a debtor in order to negotiate a repayment arrangement where one does not exist, it may be necessary and reasonable contact; however, it may not be reasonable to contact the debtor where a payment arrangement exists and the debtor is meeting those repayments, unless you are proposing a genuine alternative arrangement to benefit the debtor.

It is not reasonable or acceptable to contact a debtor to:

  • frighten or intimidate the debtor
  • demoralise, tire out or exhaust the debtor
  • embarrass the debtor in front of other people
  • or for other similar purposes (see part 2, sections 17 and 18, Conduct towards the debtor or their representatives and Conduct towards family members and other third parties).9

Example: Referral of complaints

If, during communications with a debtor or other person, you attempt to dissuade them from making a complaint or refuse to refer them to a supervisor or complaints department (that is, on the basis of a dispute about the debt or your conduct in collecting the debt), then this will be unreasonable contact and may be unconscionable conduct.

6 You should not pursue a person for a debt unless you have reasonable grounds for believing the person you contact is liable for the debt: see part 2, section 13, If liability is disputed.

7 However, there are circumstances when further contact with a debtor may not, or may no longer, be appropriate: see part 2, sections 4, 13, 15 and 16, which provide information about Hours of contact, If liability is disputed, and Contact when a payment arrangement is in place and Contact following bankruptcy or a Bankruptcy Act agreement respectively.

8 See also part 2, sections 13, 15 and 16, addressing If liability is disputed, Contact when a repayment arrangement is in place and Contact following bankruptcy or a Bankruptcy Act agreement, respectively.

9 Note also that unreasonable communication with a debtor is specifically prohibited by s. 45(2)(p) of the Australian Consumer Law and Fair Trading Act 2012 (Vic). See part 2, sections 17 and 18 in regards to Conduct towards the debtor or their representatives and Conduct towards family members and other third parties.