Debt collection guideline: for collectors and creditors

Prohibition of unconscionable conduct

Conduct may be unconscionable if it is particularly harsh or oppressive. It is behaviour that is substantially more than just hard commercial bargaining. The relationship or dealings between a creditor or collector and a debtor is one that could assume characteristics of unconscionable conduct. This is because the collector is often in a position of strength and can exert pressure or unfair tactics over a debtor.

The ACL prohibits unconscionable conduct and this prohibition is also reflected in similar provisions in the ASIC Act, so that businesses supplying financial products and services have the same rights and obligations as suppliers of other consumer products and services.

The ACL contains three provisions that relate to unconscionable conduct:

  • s. 20 (prohibiting unconscionable conduct within the meaning of the unwritten law)
  • s. 21 (prohibiting unconscionable conduct in connection with goods or services)
  • s. 22 (factors the court will consider when deciding whether conduct is unconscionable).

The ASIC Act has mirror provisions relating to unconscionable conduct in relation to financial services:

  • s. 12CA (prohibiting unconscionable conduct within the meaning of the unwritten law)
  • s. 12CB (prohibiting unconscionable conduct in connection with financial services)
  • s. 12CC (matters the court may have regard to when deciding whether conduct is unconscionable).

Section 20 of the ACL and section 12CA of the ASIC Act (special disadvantage)

This type of unconscionable conduct occurs when one party knowingly exploits the special disadvantage of another. This is general unconscionable conduct according to historical judge-made law. Factors that may give rise to a special disadvantage include:

  • ignorance of a debtor of important facts known to the staff or agent of the business
  • illiteracy or lack of education of the debtor
  • poverty or need of any kind of the debtor
  • the debtor’s age
  • infirmity of body or mind of the debtor
  • drunkenness of the debtor
  • lack of explanation and assistance when necessary.92

You should consider whether any circumstances of special disadvantage or vulnerability apply to a debtor whom you contact. If it does, make sure you interact with the debtor in a way that does not take advantage of their special disadvantage. Otherwise, your conduct is likely to be regarded as unconscionable and in breach of the law under this provision.

When you know or suspect a debtor lacks knowledge of the law, the debt recovery process, or the implications of non-payment of a debt, you must not take advantage of their ignorance.

Depending on the circumstances, it may be appropriate to encourage the debtor with a special disadvantage to seek the assistance of a financial counsellor or other suitably qualified representative to act on their behalf.


A company was found to have acted unconscionably when it used unfair tactics to obtain payment, such as creating a fake complaints handling body and a fake debt collection agency to manipulate and pressure debtors into paying alleged debts.

The court also found the company acted unconscionably by using scare tactics and unfounded claims to deter debtors from non-payment, including that if proceedings were commenced the court would order the debtor to pay a certain amount of compensation to the creditor for failing to pay on time and that any assets belonging to the debtor would be repossessed.

ACCC v Excite Mobile Pty Ltd [2013] FCA 350

Non-English speaking debtors

For someone who cannot speak English, appropriate interaction requires that the debtor can understand you. The assistance of an English-speaking family member or friend to translate should be sought, but only if the debtor proposes or agrees to this. Otherwise, the collector or creditor will need to engage a professional interpreter.93

Section 21 of the ACL (unconscionable conduct in connection with goods or services) and section 12CB of the ASIC Act (unconscionable conduct in connection with financial services)

‘A person must not in trade or commerce, in connection with the supply or possible supply of goods or services to a person … engage in conduct that is, in all the circumstances, unconscionable’.

Section 22 of the ACL and s. 12CC of the ASIC Act set out a long list of factors that courts may consider in determining whether a person has contravened s. 21 of the ACL and s. 12CB of the ASIC Act respectively, these include:

  • the relative bargaining strength of the parties
  • whether any conditions were imposed on the weaker party that were not reasonably necessary to protect the legitimate interests of the stronger party
  • whether the weaker party could understand the documentation used
  • the use of undue influence, pressure or unfair tactics by the stronger party
  • the price, or other circumstances, under which the weaker party would be able to buy or sell equivalent goods or services
  • the requirements of applicable industry codes
  • failure of the stronger party to disclose any intended conduct that might affect the interests of the weaker party
  • the willingness of the stronger party to negotiate
  • whether the stronger party has the right to unilaterally change contract terms.

These provisions apply widely to trade or commerce activities including debt collection activities.

Collectors risk breaching this prohibition particularly when they exert undue influence or pressure on, or unfair tactics against, a debtor who is at a special disadvantage or vulnerable.


A commercial agent acted unconscionably in trying to recover a debt that, unknown to the debtor, was statute-barred. It was also noted that the factual circumstances were sufficient to require the collector to establish that the transaction was fair, just and reasonable.

The debtor was an unemployed mother with a deaf, dependent child, who had originally defaulted on repayments for a car loan. The car was repossessed and sold. The residual debt was purchased by the commercial agent 10 years later, by which time accumulated interest had increased the amount owing to more than $10 000.

After being contacted by an employee of the commercial agent and told that legal action may be taken if a satisfactory arrangement could not be reached, the debtor agreed to pay $5000 to finalise the debt, of which $4500 was immediately charged to her credit card. On appeal, the court upheld the original decision that the agent through its employee had acted unconscionably.

The court noted that:

… the fact of someone from a firm of lawyers ‘cold-calling’ a woman of the respondent’s socio-economic standing at home at 6.30 in the evening, and interrogating her as to her personal and financial circumstances while insinuating that in the absence of her agreement to pay legal proceedings may be instituted, is capable of constituting pressure of a very high order.94

The court ordered that the debtor did not have to pay the $5000 debt and instead, that the creditor return the monies paid by the debtor.

Collection House v Taylor [2004] VSC 49


A creditor acted unconscionably by failing to stop efforts to repossess a car subject to a chattel mortgage when there was reasonable cause to understand that there would be a physical confrontation if they continued in their attempt.

Other factors considered in the court’s declaration of unconscionability included the creditor sending the debtor a notice implying that they would not or could not lawfully repossess the car without a court order, and then proceeding to repossess the vehicle without such an order, as well as the fact that the collection company’s agents entered the debtor’s residence by jumping a gate and opening a garage door from the inside.

ACCC v Esanda Finance Corporation Ltd [2003] FCA 1225

92 See Blomley v Ryan (1956) 99 CLR 362; Commercial Bank of Australia v Amadio (1983) 151 CLR 447.

93 The Department of Immigration and Border Protection provides a 24-hour Translating and Interpreting Service (TIS National) accessible on 13 1450. User fees generally apply.

94 Collection House v Taylor [2004] VSC 49 at [57].