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 

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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. 

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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)

What are the requirements for opening Commbank multiple savings accounts?

Existing Commbank account holders can open additional accounts online You can open multiple savings accounts with Commbank to meet various goals like a down payment for a home or buying a car. 

To open an account, you’ll need the following:

  • An Australian residential address
  • To be 14 years or older
  • A Tax File Number (TFN) or TFN exemption.
  • Tax residency details

If you’re not a current Commbank account holder, you’ll need an Australian driving licence, birth certificate or passport and Medicare card. You may also have to visit a branch if your identity cannot be confirmed online. 

Do banks run credit checks on savings accounts?

When you apply to open a new savings account, some providers may conduct a credit check, meaning that they will ask a credit bureau for your credit history. This isn’t always the case on savings accounts though and depends on the provider, as you aren’t borrowing money. 

As you are opening a savings account and not borrowing funds, this credit check is considered a soft inquiry and should not affect your credit score. If the bank has run the credit check, you can often still open a savings account even if you have a poor score, provided you meet other requirements. 

What is a Westpac locked savings account?

The Westpac locked savings account (also known as "Westpac Life") can help customers reach savings goals faster through bonus interest. Customers receive 0.2 per cent standard base interest with a variable bonus rate of 0.35 per cent when the closing balance at the end of the month is higher than the opening balance.

There are some conditions to earn the bonus interest on Westpac's locked savings account, though. First, you’ll need to increase the balance each month either through a deposit or not making any withdrawals, and then link it to a Westpac Choice account and make at least five eligible payments using your debit card. Please consult your bank as to what an eligible payment is. 

What are the two types of NAB locked savings accounts?

With a locked savings account in NAB, you can earn bonus interest and learn financial discipline. NAB offers two types of locked savings accounts, each with their own terms and conditions.

The NAB Reward Saver account pays a variable base interest rate of 0.05 per cent per annum and a bonus interest of 0.55 per cent. You’re eligible for the bonus if you make a minimum of one deposit on or before the second last banking day and have no withdrawals in the month.

Meanwhile, the NAB iSaver account provides 0.05 per cent as the standard base interest rate and a fixed bonus margin of 0.55 per cent during the first four months from the date of opening the account. You can park your cash in the account and enjoy unlimited monthly transfers between linked daily bank accounts without impacting the interest rate.

Can you have multiple ING savings accounts?

Yes, you can open up to nine accounts with ING at any particular time. If you’re saving money for various goals, such as buying a car or taking a holiday, you can name each of your multiple ING savings accounts differently.

To get a Savings Maximiser account, you’ll need to deposit more than $1000 every month and make at least five additional purchases. If you also want to grow your savings, from 1st March 2021, you can earn up to 1.35 per cent per annum variable interest on one account with a balance of up to $100,000 when you also maintain an Orange Everyday account.

With ING, multiple savings accounts can help keep track of all your savings goals. All the accounts offer flexible withdrawals where you can withdraw as low or as high as you want without impacting your earning interest rate. However, you can only earn the bonus interest on one account. To apply for a Savings Maximiser account, you can visit ingdirect.com.au.

What is an ANZ locked savings account?

An ANZ locked savings account locks your money and prevents you from spending. You may use a standard savings account as the account where your salary is deposited. You can then withdraw funds when needed, but aren’t able to make purchases with it. However, this account may not grow much as the continual withdrawing of funds will limit the interest you can earn.

With a locked savings account in ANZ, you know your savings will grow because you can’t access the money. You can also qualify for a bonus when you deposit at least $10 per month and don’t make any withdrawals. To help you with this further you can set up an automatic transfer from your regular ANZ savings or transaction account so you don’t forget to make a monthly deposit.

Your ANZ locked savings account offers you a base interest rate of 0.1 per cent per annum plus an additional bonus interest of 0.49 per cent per year. The interest is calculated daily and credited to your account on the last working day of the month.

Should I open a Commonwealth locked savings account?

If you have trouble saving money, a Commbank locked savings account could be a potential solution. A locked savings account won’t let you make withdrawals and as such, it can help you grow your savings balance if you keep topping it up. 

The Commonwealth locked savings account advertises high-interest rates and minimal maintenance fees, along with a host of other incentives that will encourage you not to touch the money. 

The account offers a higher interest rate for each month that you make limited or no withdrawals, as well as regular deposits. 

To qualify for a Commonwealth locked savings account with the advertised features, you will need to fulfil specific criteria such as:

  • Depositing a fixed minimum amount into the account every month.
  • Making a fixed number of deposits each month.
  • Making a minimum or no withdrawals each month.
  • Maintaining a minimum account balance.

Should I open multiple savings accounts with UBank?

UBank offers customers an opportunity to make the most of their savings by opening multiple savings accounts. Having multiple savings accounts with UBank may be ideal for savers tracking different goals in separate accounts. 

It’s important to note that to earn bonus interest, you will still need to meet the conditions of the UBank savings account every month. If you don’t make these deposits, you will receive the standard interest rate, which is typically lower. 

Keep in mind that you won’t earn bonus interest on your UBank savings account in the month an account is opened and if you open multiple savings accounts with UBank, you'll start earning any bonus interest the following month. 

It's also not yet known how long the special interest rate will hang around for, so please check with your bank for more information. 

What are the requirements of an ING Bank locked savings account?

An ING bank locked savings account - also called a term deposit - offers you interest in exchange for holding your money for a period of time.

The terms offered include as little as 90 days or as long as two years. Generally, the longer you lock your money away, the higher the rate of interest. 

The minimum deposit amount for an ING locked savings account is $10,000. 

To be eligible to apply, you must: 

  • Be an Australian resident for tax purposes
  • Be aged 13 years or older
  • Hold the account for personal use (ING offers business term deposits as a separate product). 

 

Do I have to claim interest on my savings account?

When you lodge your income tax returns, you must include in the documentation all your sources of income, including bank interest. Your bank will report any interest you earn on the funds in your savings account to the Australian Tax Office (ATO). When the ATO then compares this information with your tax returns,  you also need to have mentioned the interest earned. If there is any discrepancy, you’ll receive a letter from the ATO. 

Avoid this situation by ensuring you receive your bank statement with interest noted. Then declare the interest in your tax returns and pay the tax that’s applicable based on the income tax rate.

You only need to claim your share of the interest earned for joint accounts. If you manage an account for your child and receive or spend money via this account, you will also need to report any interest earned from said account.

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 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