10-141AD ASIC acts against Queensland debt collector
Wednesday 30 June 2010
ASIC has taken action against Queensland-based Axess Debt Management Pty Ltd (Axess) in relation to its debt collection practices.
ASIC received complaints that Axess was collecting debts that had been statute-barred (statute-barred debts are debts in relation to which a statutory limitation period has expired). ASIC enquiries revealed that Axess had been miscalculating the commencement of the limitation periods and consequently engaging in debt collection activity regarding debts that were statute-barred.
In response to complaints received, in September 2009 ASIC raised concerns with Axess, who investigated and identified 35 accounts where payment was received despite the relevant cause of action having been extinguished. Following discussions with ASIC, Axess has:
reviewed and amended its policies to prevent recurrence of this issue
proposed to refund all payments to affected debtors with a total amount of $25,000 to be refunded.
The resolution of this issue is consistent with ASIC's first priority, which is to assist and protect retail investors and consumers in the financial economy.
ASIC acknowledges the cooperation of Axess in responding to and resolving this issue.
As a business that generally purchases debts from credit providers, Axess and similar businesses will be required to hold an Australian Credit Licence and comply with conduct and disclosure obligations under new Commonwealth laws governing the consumer credit sector, which come into force on 1 July 2010. For more information, visit www.asic.gov.au/credit.
Responsibility for debt collection regulation at the Federal level is divided between ASIC and the ACCC. In general terms, ASIC has responsibility where the debt relates to the provision of a financial service, including a credit facility. The ACCC has responsibility where the debt relates to the provision of other goods and services (eg. utilities).
Further information for debt collectors and creditors can be found in the joint publication by ASIC and the Australian Competition & Consumer Commission (ACCC), Debt collection guideline: for collectors and creditors, dated October 2005, which is available at www.asic.gov.au or by phoning the ASIC Infoline on 1300 300 630.
ASIC Report 55: Collecting statute-barred debts (ASIC Rep 55) identified failures by industry to adopt processes for identifying whether debts are statute-barred and misunderstanding of laws relating to limitation periods. The report explained the different limitation periods between jurisdictions and noted that the NSW legislation goes further and extinguishes any cause of action when the debt becomes statute-barred.
Debt collectors should not state or imply that legal action will or may be taken when a defence at law applies. Among other defences, a debtor will be able to claim a defence if the right to pursue the debt in court has expired due to the passing of time. The time limit varies from state to state.
Legislation in NSW goes further and specifically extinguishes the cause of action: section 63 of the Limitation Act 1969 (NSW). As a result, after the limitation period expires, there will be no debt to request or demand payment of. Any action taken on such debts is statute-barred: subsection 14(1)(a) of the Limitation Act 1969 (NSW).
Representing that legal action will or may be taken when a debt is statute-barred may be misleading and deceptive and such representations may also be unconscionable when the debtor has not had the opportunity to obtain legal advice.