Debt collection guideline: for collectors and creditors

Prohibition of the use of physical force, undue harassment and coercion

Section 50 of the ACL

A person must not use physical force, undue harassment or coercion in connection with the supply or possible supply of goods or services or the payment for goods or services.

Section 12DJ of the ASIC Act

A person contravenes this subsection if the person:

  1. uses physical force or undue harassment or coercion, and
  2. uses such force, harassment or coercion in connection with the supply or possible supply of financial services to a consumer or the payment for financial services by a consumer.

Section 50 of the ACL and s. 12DJ of the ASIC Act prohibit the use of:

  • physical force
  • undue harassment, and/or
  • coercion

to support a demand for payment for goods or services/financial services. These provisions apply to the collector’s conduct towards a debtor, their representative or towards a third party (for instance, a debtor’s family member).

The terms ‘physical force’, ‘undue harassment’ and ‘coercion’ are not defined in the law. They should be understood to have their ordinary meaning.

Physical force

The use of any violence or physical force is prohibited under s. 50 of the ACL and s. 12DJ of the ASIC Act. The use of force may also be a criminal offence under state and territory criminal law.83

CASE STUDY

In ACCC v Davis and ACCC v Capalaba83 the court ruled that agents representing a collection agency had contravened the law by physically holding a debtor to the ground while removing the debtor’s vehicle from the debtor’s premises. The fact that the collector had a contractual right to seize the vehicle under a mortgage over the vehicle did not permit the use of physical force to overcome the debtor’s resistance to the seizure.

In ACCC v Davis, the court declared that the company engaged in undue harassment and coercion and made injunctions restraining the company from engaging in similar conduct in the future. The company was ordered to pay part of the ACCC’s costs and the individuals involved in the conduct were ordered to attend a trade practices compliance seminar.

In ACCC v Capalaba, the court ordered an injunction restraining the company and the individuals involved in the conduct from engaging in undue harassment and coercion in the future. The court also ordered the company and those individuals to attend a trade practices compliance program and to pay the ACCC’s costs.

Undue harassment

Undue harassment means unnecessary or excessive contact or communication with a person, to the point where that person feels intimidated, tired or demoralised. Undue harassment may occur when repeated approaches are made or repeated pressure is applied to a debtor, going beyond what is acceptable or reasonable. While the harassment must be ‘undue’, there is no requirement that the conduct must involve the threat of an illegal act to contravene the law.84 For further information on undue harassment, see part 2, section 5, Frequency of contact.

CASE STUDY

The meaning of the term ‘undue harassment’ has been explained as follows85:

The word harassment means in the present context persistent disturbance or torment. In the case of a person employed to recover money owing to others … it can extend to cases where there are frequent unwelcome approaches requesting payment of a debt. However, such unwelcome approaches would not constitute undue harassment, at least where the demands made are legitimate and reasonably made.

On the other hand where the frequency, nature or content of such communications is such that they are calculated to intimidate or demoralise, tire out or exhaust a debtor, rather than merely convey the demand for recovery, the conduct will constitute undue harassment. … Generally it can be said that a person will be harassed by another when the former is troubled repeatedly by the latter.

The reasonableness of the conduct will be relevant to whether the harassment constitutes undue harassment.

ACCC v The Maritime Union of Australia [2001] FCA 1549

Coercion

Judicial authority indicates that s. 50 of the ACL and s. 12DJ of the ASIC Act prohibit any ‘coercion’, not just ‘undue coercion’.86 Coercion involves actual or threatened force or pressure that restricts a debtor’s choice or freedom to act.87

It is important to note that coercion may be exhibited in many forms, and is not limited to using or threatening physical force. A person may be considered to be coerced by another person either to do something or refrain from doing something. Unlike undue harassment, there is no requirement for the behaviour to be repetitive for it to amount to coercion.

CASE STUDY

A company was found to have used coercion when it created a fictitious complaints handling body and a fictitious debt collection agency to obtain payment. The company coerced debtors into paying alleged debts by manipulating their ability to make informed decisions about liability for payment and/or their rights to commence legal proceedings to have liability decided by a court.

ACCC v Excite Mobile Pty Ltd [2013] FCA 350

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