Debt collection guideline: for collectors and creditors

21. Legal action and procedures

  1. This section should be read in conjunction with part 2, section 19, Representations about the consequences of non-payment and section 20, Representations about the legal status of debt, including statute-barred debt.
  2. You have a right to pursue debts through the courts. However, in pursuing or threatening to pursue legal action you must comply with the consumer protection laws.
  3. Do not make misrepresentations about the legal process. For instance, do not:
    • misrepresent the nature or purpose of correspondence. Ensure the layout, wording and design of documents (for example, letters of demand) are not likely to create the impression in the mind of the debtor or their representative that they are court process or other court documents, or that they were sent from a solicitor’s office, when this was not the case73
    • suggest that telephone calls are recorded ‘for training purposes’ (and, by implication, only for such purposes) when those calls may also be used as evidence
    • misrepresent that failure to pay a debt (where no fraud is involved) is a criminal or police matter, or is likely to be referred to the police74
    • misrepresent that you are a police officer, court official, or have some official capacity that you do not have to claim or enforce payment of a debt75
    • state or imply that unsecured basic household items can be seized if the debtor is made bankrupt76
    • state or imply that legal action has already been taken, or judgment entered, in relation to the debt when this is not the case.


A company implied to a debtor that it had decided to and would commence legal proceedings against the debtor, when in fact the company had not, could not and would not do so. The company also represented to a debtor that it had been given strict instructions from a solicitor in relation to a debt when this was not the case.

The court found that the constant references to litigation were not an accident within this case. They were the intended outcome of the company’s internal manual which promoted threatening litigation as a means to achieving recoveries. Further, the court found that the company was claiming to be a ‘litigation company’ when this was not true.

ASIC v Accounts Control Management Services Pty Ltd [2012] FCA 1164

  1. In certain circumstances, the way legal action is threatened or employed can amount to unconscionable conduct or harassment. For instance, this may be the case if you start or escalate court action against a debtor when you have agreed not to, or when a payment arrangement is in place and is being complied with.
  2. When you know or can reasonably obtain the debtor’s current address, we recommend that you issue debt recovery proceedings in the jurisdiction where the debtor lives.77 In some circumstances, limiting a debtor’s ability to contest court proceedings by starting those proceedings in an inconvenient jurisdiction may constitute, or be part of a course of conduct constituting unconscionable conduct.


A collector engaged in misleading or deceptive conduct by representing that the company was about to sell a debtor’s residence to obtain payment, when the company had not started any legal proceedings at the time. The collector also made false claims that she would have the debtor arrested by the police or the fraud squad.

ACCC v McCaskey [2000] FCA 1037

73See also s. 45(2)(g) Australian Consumer Law and Fair Trading Act 2012 (Vic) and s. 43(2)(c) Fair Trading Act 1987 (SA). These provisions relate specifically to misrepresentations regarding documents.

74See also s. ;43(2)(a) Fair Trading Act 1987 (SA) which specifically prohibits false representations that criminal or other proceedings will lie for non-payment of a debt.

75See also s. 45(2)(h) Australian Consumer Law and Fair Trading Act 2012 (Vic) and s. 43(2)(b) Fair Trading Act 1987 (SA).

76Section 116 of the Bankruptcy Act excludes these items from seizure by creditors.

77Note that r. 36(3) of the NCCP Regulations provides that court proceedings must be brought in the jurisdiction in which the debtor resides.