5 things debt collectors wish you knew

5 things debt collectors wish you knew

People can fall into debt for any number of reasons, and while it’s not the best position to be in, it can happen to the best of us.

It can be a scary experience to be contacted by a debt collector, but it won’t help the situation to bury your head in the sand.

RateCity spoke to EC Credit Control Debt Collector, Chris Loveridge, about his experience chasing consumer and commercial debt, and what he wishes more people knew about his industry.

What is a debt collector? 

A debt collector is someone who works on behalf of creditor clients to recover outstanding consumer and commercial debts.

In Australia, debt collection is regulated by both The Australian Competition & Consumer Commission (ACCC) and Australian Securities and Investments Commission (ASIC). Both debtors and debt collectors have rights and obligations to ensure that deb collection activity is consistent with consumer protection laws.

Their work is not the most popular, and they are often criticised by those who may be uneducated about the debt collection process. However, it is important to keep in mind that debt collectors are working on behalf of creditors who have hired them to help recover outstanding payments.

What debt collectors wish you knew:

  1. They’re not restricted to phone calls

Don’t be shocked if you find a message in your Facebook inbox.

It is perfectly legal for modern day debt collection agencies to contact you in ways besides a phone call, such as social media.

“Modern debt collection agencies have little or no face to face contact with debtors, preferring to utilise contact technology options such as telephone, fax, mail, SMS and email to facilitate faster resolution,” said Mr Loveridge.

Reasonable contact times:

Contact by telephone Monday – Friday 7:30am – 9pm
Weekends 9am – 9pm
National Public Holidays No contact
Face-to-face contact Monday – Friday 9am – 9pm
Weekends 9am – 9pm
National Public Holidays No contact
All workplace contact Debtor’s normal working hours (if known), or 9am – 5pm on weekdays.
Social media & email Any time, however account cannot be shared with another person and message cannot be viewed by anyone besides debtor.

 

  1. “How can I pay in full today?”

This is the ideal way to respond when a debt collector contacts you, according to Mr Loveridge.

“There is a small section in the ACCC Guidelines for collectors and creditors that covers a debtor’s responsibilities,” said Mr Loveridge.

The ACCC guidelines state that when debtors are legally responsible for paying the debts they legitimately owe, they should:

  • Not attempt to avoid the obligation to satisfy debts they have incurred;
  • Promptly contact creditors and debt collectors when they are experiencing financial difficulties and attempt to negotiate a variation in payments or other arrangement; and
  • Be candid about their financial position, including any other debts.
  1. They can help with payment plans 

istock_79305201_small5

Anyone can find themselves experiencing financial difficulties, and debt collectors understand this better than anyone. 

“Debt collectors will most likely be prepared to negotiate a suitable payment plan to suit both debtor and creditor if it is clear the debtor is struggling financially. The debtor can also avail of local budgeting services to assist in meeting their financial obligations,” advised Mr Loveridge.

It is also not unusual for a debtor to dispute the debt in question, however you should be prepared to put this in writing.

“Whilst a debt can be verbally disputed, in written format there can be no ambiguity around what the dispute entails and it forms a clear trail should legal action ensue,” explained Mr Loveridge.

  1. They also want to avoid legal action

It’s not just debtors who are protected by laws and regulations. There are legal consequences to the debtor if non-payment occurs and the creditor holds a signed contract.

These include the withholding of further goods and services, as well as default listing the debtor with a credit reporting agency.

What is a default listing?

According to credit agency Equifax, if you miss a payment worth more than $150 and it is more than 60 days overdue this is listed as a default. A default remains on your credit report for five years.

But it’s important to keep in mind that both creditor and debt collector also want to avoid this process.

“Court action against the debtor is an action of last resort for the creditor,” said Mr Loveridge.

“[It] should not be dismissed by the debtor, and may result in bankruptcy or liquidation. In most cases, any legal action taken against the debtor will result in additional costs and interest being added to the claim.”

  1. Debt collectors are not to be feared

The most important thing to keep in mind if you’ve been contacted by a debt collector is that they’re here to assist you too.

“Whilst debt collectors are always acting on the instruction of their client and are seeking payment in full, there are obligations to also consider the debtors financial circumstances which may lead to a payment arrangement over an agreed period,” said Mr Loveridge.

“All good debt collectors will work with you to have a positive outcome but you should remember that it isn’t the debt collector who has put you in this situation.”

If you’re feeling too nervous to answer the phone, keep in mind that it’s important to not ignore an approach from a debt collector as this can be met with escalated action and an adversely impacted credit rating, bankruptcy or liquidation.

“Keep the communication lines open at all times,” added Mr Loveridge. 

Did you find this helpful? Why not share this article?

Advertisement

RateCity

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the ratecity.com.au Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy

Advertisement

Learn more about savings accounts

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.