Debt collection

57.47 Credit providers may use credit reports to assist them in recovering overdue payments.^[47] A credit provider, in this context, may include a debt collection agency that has purchased debts from a credit provider, or other assignee.

57.48 In addition, a credit provider may disclose certain items of personal information from a credit report to a debt collector for the purpose of collecting overdue payments. The information that may be disclosed is limited to: identifying information about the individual; information about overdue payments; and information about court judgments and bankruptcy orders.^[48]

57.49 Where credit providers engaged in debt collection have direct access to the credit reporting system, other issues arise. These include individuals being threatened with having a default listed as a ‘collection tool’; the listing of defaults that are disputed by the individuals concerned or without proper notification being given to them; and the listing of individuals who are not able to be located as having committed a serious credit infringement.^[49]

Submissions and consultations

57.50 Mercantile agents and others engaged in debt collection expressed concern that they are not permitted to obtain personal information on credit information files directly from credit reporting agencies or to report information to agencies. This was said to hamper the ability of mercantile agents to locate debtors and, more generally, to assist small businesses in risk management.^[50]

57.51 Some stakeholders highlighted the need for debt collectors to have direct access to the location information available on credit information files, particularly in the light of concerns about restrictions on access to other sources of location information.^[51] Others considered that the debt collection provisions were appropriate, and submitted that debt collectors should not be entitled to access credit reporting information directly.^[52]

57.52 Veda Advantage acknowledged that ‘the threat of default listings as a primary means of, or in the absence of other debt collection activity is of great concern to consumers and their advocates’. Veda considered, however, that such concerns about the use of credit reporting information can be addressed by means other than restricting access—including through credit reporting agency subscription agreements and rules of reciprocity.^[53]

57.53 In DP 72, the ALRC stated that there appeared to be no compelling reason for change to the rules restricting access to credit reporting information by debt collectors.^[54] The ALRC also noted that many of the debt collection issues raised in submissions are already canvassed in guidance issued by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC), who are jointly responsible for administering consumer protection legislation in relation to the debt collection industry.^[55]

57.54 Some stakeholders agreed with the ALRC’s view that the existing position regarding access to credit reporting information by debt collectors should be maintained under the new Privacy (Credit Reporting Information) Regulations.^[56]

57.55 The Australian Collectors Association submitted, however, that the ‘Use and Disclosure’ principle in the model UPPs and the new regulations should

allow creditors, or their collectors and assignees who provide a related secondary purpose, to access a consumer’s credit bureau file to seek the most current debtor contact details and debt profile. Alternatively, collectors and assignees could be given the authority to access the credit bureau within a reasonable time after a debt is outsourced for collection or assigned, provided the collector or assignee meets the standards set for other agencies and organisations with bureau access eg membership of an alternative dispute resolution scheme.^[57]

57.56 The Australian Collectors Association also noted that debt collectors need ‘key customer identification details used within the lending organisation to appropriately identify the customer’, and that this information ‘is much broader than currently allowed under the Act, which limits information creditors can provide collectors to debtor identity such as name and address and the debt amount’.^[58]

ALRC’s view

57.57 The use and disclosure of credit reporting information for debt collection purposes is widely accepted as being one of the primary purposes of the credit reporting system. Access to credit reporting information for debt collection is, on some views, essential for the efficient functioning of the credit market.^[59] Through the credit reporting system, credit providers share information necessary to locate debtors and are made aware of defaults to other credit providers.

57.58 Concerns about debt collection appear to arise mainly where debt collection activity is outsourced from the original credit provider to debt collection businesses, which may also become the assignees of the debt.^[60]

57.59 Where debt collectors are not the assignees of the debt, they can only access credit reporting information through the credit provider. This can hinder the debt collection process if the credit provider for whom a debt collector acts is not a subscriber to the credit reporting system. The ALRC understands that part of the reason some organisations have been lobbying for direct access to the credit reporting system is to enable them to service those businesses that, for reasons including size and resources, cannot participate in it directly.

57.60 There is no compelling reason for change to the rules governing access to credit reporting information by debt collectors. The existing barriers to access are not necessarily regulatory. Access may be affected by commercial decisions made by credit reporting agencies in relation to terms and conditions of access, including decisions about fees and the quality of data likely to be provided by potential subscribers.

57.61 Many of the issues raised in submissions are already canvassed in guidance issued by the ACCC and ASIC.^[61] For example, the Debt Collection: Guideline for Collectors and Creditors reflects the views of the ACCC and ASIC about how provisions of the Trade Practices Act 1974 (Cth) and Australian Securities and Investment Commission Act 2001 (Cth) apply to the conduct of debt collection.^[62]

57.62 It would not be effective or appropriate for the new Privacy (Credit Reporting Information) Regulations to deal with issues that primarily concern debt collection practices. Debt collection practices that involve credit reporting, however, are related to broader concerns about data quality, which are discussed in Chapter 58. For example, consistent reporting of defaults, governed by industry protocols, would lessen the opportunity for debt collectors to threaten listing in order to obtain payment.