1 Debt recovery law and your clientConsumer Action Law Centre Worker advice line: Rural access: Exercise Everyone stand up and form a line at the left of the room as no experience in debt recovery, and at the right of the room as most experienced in debt recovery law LE and Annette to ask participants at each end why and to give an anecdote of this Consider from there whether we ask more experienced FC’s to move to tables with least experienced

2 Learning Outcomes The provision of information to clients about their rights and responsibilities The use of appropriate Credit Law to advocate effectively for your client Review the debt collection guidelines The protections and obligations under the JDRA The application of Court enforcement process and assets The Role of the Sheriff in the enforcement of court orders

3 Session overview We will talk about:the process from entering a contracts through to the court process dealing with the debt – legal arguments: attacking the contract attacking creditors conduct (harassment) what you can do when your client is sued, and before judgment. after Judgment - how the enforcement process works and the protections including “judgment proof” We will be talking about this in the context of contract related debts. That is, energy accounts, credit cards. In some ways, different rules/laws apply to other types of debts such as infringements.

4 Legal Process At each stages of this process your client has rights. For this exercise we will talk about the first three stages. 1 Entering a contract, 2 defaulting (e.g. not paying and getting notice) 3 then being sued. It goes beyond this, but for this purpose, we will talk about these three stages. This is all about using the law and practical situation to get the best outcome. A key point to emphasise is the need to assess whether the client owes the debt, or owes all that is claimed. Don’t just negotiate payment plans, regardless of whether the debtor might have a defence. Often times the best starting point is to ask for proof of the debt and the amount claimed.

5 Group exercise What legal protections are your clients protected by at each stage of the process? Break into groups of tables. Talk for 2 mins. Each group will report back on their part of the process – so at time of entry, after entry and then at time of being sued. At the time of singing up your clients are protected by: Responsible lending Maladministration Unjust contracts Banking code of practice After entering the contracts: Hardship Repossession rules under NCCPA – s 88 default notice, acceleration clause, repossession of goods, sale and notices of sale. Debt collection guidelines, ACL and ACLFTA JDRA and social security (administration) act Time of being sued: Court rules about service of legal documents, time limits, FOS

6 Debt Collection GuidelinesDownload: ASIC latory- resources/credit/debt- collection/ ACCC cations Nbowe we’ve identified the key protections. Lets talk about the protections when being pursued for a debt. Lets focus on this. I like to show by example: Definition of Undue Harassment “Undue harassment means unnecessary or excessive contact or communication with a person to the point where that person feels intimidated, tired or demoralised. Undue harassment may occur when repeated approaches are made or repeated pressure is applied to a debtor, going beyond what is acceptable or reasonable. While the harassment must be 'undue' there is no requirement that the conduct must involve the threat of an illegal act to contravene the law.” Guiding principle – contact must be for a reasonable purpose and not excessive. Examples: DC knows they cannot make meaningful payment and continues to make contact.

7 Debt Collection GuidelinesQuiz When can a debt collector visit your home? Why? When can a debt collector visit an employer? Why? What timeframes can debt collectors demand you respond within? Why? Can a debt collector contact you by facebook? Why? Can a debt collector charge you their fees or costs? Why? What can a Debt collector do if you tell them you cannot pay? Exercise: each table with pick and question to answer Yes but the guidelines say only as an option of last resort where reasonable attempts to contact by other means have failed e.g. debtor refuses to respond. It must also be within the hours of contact in the guidelines. The guidelines recommend that contact at home by phone or letter is appropriate. But a debtor CAN request contact elsewhere and not to be contacted at home. Consider privacy issues. Again only as option of last resort or where they run the business or have asked to be visited at work. There is a serious risk that if this happens uninvited, then it could be undue harassment or coercion. If they ask not to be contacted at work, and offer an alternative contact method, the DC must use that. Consider privacy issues. Unreasonably frequent attempted contact may also amount to undue harassment. Debtors and third parties are entitled to be free from excessive communications from collectors. We recommend that you do not contact a debtor more than three times per week, or 10 times per month at most (when contact is actually made, as distinct from attempted contact) and only when it is necessary to do so. REMEMBER STANDARD OF REASONABLENESS and if the conumers has explained they cannot pay, contacting three times per week is unreasonable. Note that attempted contact is not counted e.g. calls where phone doesn’t answer and no msg left Yes but note privacy obligations Our view is no. While this is not covered by the guidelines, it is equally as important. Legal costs cannot be charged unless there is a court order. A DC must not recover Fees/remuneration from consumer under by section 52 ACLFTA UNLESS it is a credit contract which allows it or it is not a P, D & H debt. If a DC has been informed the consumer cannot pay and is unable to make meaningful sustained payments (low income, unemployed, long term illness etc) then contact will not be reasonable UNLESS you have reason to think the circs have changed.

8 Prohibited Debt Collection PracticesList of prohibited actions for debt collectors for which you can claim up to $10, when debt collector has engaged in more than once and client suffers distress or humiliation. (Vic law only) Breaches include: Intimidation Exposure to ridicule Disclosure of debt information without consent False or misleading representation Communication in a manner that is unreasonable in frequency, nature or content

9 Examples of harassmentIn ASIC v ACM [2012] FCA 1164, harassment amounted to: repeated threats to tell a debtors husband where he didn’t know about it threats to call a debtor’s friends and employer until the debt was repaid threats to have Sheriff’s officers attend a debtor's home or place of employment in a marked car calls to neighbours and friends a threat to issue a warrant for a debtor’s arrest PLAY THE ACM RECORDING In May 2011, ASIC brought proceedings alleging that ACM contravened the Australian Securities and Investments Commission Act when dealing with eight debtors between November 2008 and June 2010 ASIC presented to the Court 96 phone calls, mostly between ACM debt collectors and the debtors, and the ACM debt collector training manual that was in use at the relevant time as evidence of ACM’s conduct. The Court found, ‘the manual made it very plain that debtors should be threatened with litigation’. Others were: a threat to take action that would result in a debtor’s taxi licence being revoked, and a threat to take action that would result in a debtor being unable to travel overseas. The Court described the tone of one of ACM’s supervisors as ‘rude, condescending and vicious, no description of this call (and some of her later efforts) can adequately capture the offensiveness involved’. The Court described the tone of one of ACM’s supervisors as ‘rude, condescending and vicious, no description of this call (and some of her later efforts) can adequately capture the offensiveness involved’.

10 Examples of harassmentACM was a firm which specialised in commencing legal proceedings for the recovery of debts (when it was not) ACM frequently commenced legal proceedings (when it did not) debtors had been referred to ACM’s lawyers for legal action (when they had not) ACM would take legal action (when it had not) legal proceedings, including bankruptcy proceedings, would be commenced immediately (when they would not), and In May 2011, ASIC brought proceedings alleging that ACM contravened the Australian Securities and Investments Commission Act when dealing with eight debtors between November 2008 and June 2010 ASIC presented to the Court 96 phone calls, mostly between ACM debt collectors and the debtors, and the ACM debt collector training manual that was in use at the relevant time as evidence of ACM’s conduct. The Court found, ‘the manual made it very plain that debtors should be threatened with litigation’. Others were: a threat to take action that would result in a debtor’s taxi licence being revoked, and a threat to take action that would result in a debtor being unable to travel overseas. The Court described the tone of one of ACM’s supervisors as ‘rude, condescending and vicious, no description of this call (and some of her later efforts) can adequately capture the offensiveness involved’. The Court described the tone of one of ACM’s supervisors as ‘rude, condescending and vicious, no description of this call (and some of her later efforts) can adequately capture the offensiveness involved’.

11 Misleading conduct ACCC v McCaskey [2000] FCR 1037company said it could sell a debtors home when it had not started any legal action. The company could have the consumer arrested by the police or fraud squad

12 Unconscionable conductACCC v Excite Mobile Pty Ltd [2013] FCA 350 Fictitious complaints handling process to induce debtors that their complaints were being handled when they were not, and they were unduly coerced to pay after the fictitious process

13 False/misleading statementsACCC v Sampson [2011] FCA 1165 the customer would incur legal expenses and lawyers costs in addition to the debt The firm could get a judgment against the customer without going to court, and could enforce through a warrant, attachment of earnings order itself A number of representations made by a lawyer, who intended to collect small debts on behalf of video rental stores, were found to be misleading or deceptive because: in reality legal costs may not be recovered except in certain circumstances such as when a creditor is successful in legal proceedings and when the court makes orders for the payment of costs in reality, this can only be enforced by a court.

14 So you’ve been sued Hand out form 5A and ask, what do you do in response to this? Other states - unknown Hearing or, if no defence, default judgment. Essentially stamping but no hearing - can happen even where creditor doesn’t follow process/makes incorrect claim Set aside default judgment – discuss factors Enforcement

15 So you’ve been sued Must be served How does service work?Who can be served? What if your client says they haven’t been served? 1. Service is notice. It is a seriously important requirement about fairness. The rules of each court differ. 2. The Magistrates Court will normally hear all claims under $100,000, so most of the debts of our clients. The rules there relate to personal service, so on the debtor personally or anyone at their home that looks over the age of 16. Mags Court also has a ‘notice’ provision which essentially says if you somehow become aware of it, service is effective 3 Substituted service – can apply for orders that service will be done on certain conditions e.g. where person is avoiding service 3 Affidavit of service, judgment can be considered irregular and set aside as of right.

16 So you’ve been sued Must be servedThen the clock ticks for your client to: make an EDR complaint will stop the clock. Mags court - 21 days to defence County/Supreme – 10 days to lodge appearance Hand out form 5a Other states - unknown Hearing or, if no defence, default judgment. Essentially stamping but no hearing - can happen even where creditor doesn’t follow process/makes incorrect claim Set aside default judgment – discuss factors Enforcement

17 Judgment Default or Summary judgments Can occur even when:client has not been served correctly procedural requirements have not been met an incorrect debt is claimed Find out How long ago was default judgment? When was client informed? Why didn’t client respond initially? What will it cost to apply for a rehearing? Things to take into account: Amount claimed – correct? in correct service regular/irregular? setting aside? If something NQR – get advice from the best lawyers in the universe

18 Judgment Question: practically, what does judgment mean? InterestCredit report Enforceable – more than 15 years!

19 ‘Judgment proof’ Judgment Debt Recovery Act 1984 (Vic)An instalment order shall not without the consent of the judgment debtor be made if the income of the judgment debtor is derived solely from a pension … 12(1) Social Security Administration Act 1991 (Cth) A social security payment is absolutely inalienable, whether by way of, or in consequence of, sale, assignment, charge, execution, bankruptcy or otherwise.- 60(1) Lets ask the sheriff, what is judgment proof? Judgment proof is not a legal concept. It has no recognition in law. It is something fashioned by us!!!! IT is not applicable to all states and not forever. Be careful when using it. Social Security Administration Act 1991 (Cth) A social security payment is absolutely inalienable, whether by way of, or in consequence of, sale, assignment, charge, execution, bankruptcy or otherwise.- 60(1) Judgment Debt Recovery Act 1984 (Vic) An instalment order shall not without the consent of the judgment debtor be made if the income of the judgment debtor is derived solely from a pension benefit allowance or other regular payment under the Commonwealth Social Security Act 1947 or section 24 of the Children, Youth and Families Act (1)

20 ‘Judgment proof’ Do you use the do not contact me letter?What has been your experience? Ours has been varied: Some companies ignore it Some proceed to consider legal action and can sue Some want to see context and hate it as a default/template

21 After judgment Scales are tipped in favour of the creditor. They are in the position of power. It is costly and technical to get a judgment set aside unless you have a clear agreement with the creditor. Magistrates Court Summons for oral examination? Instalment orders Judgment debt Recovery Act forms on Magistrates court rules and on its website  garnishee order instalment order

22 Pop quiz 1. Who can take a car and when?2. Who can take a house and when? Who can take a car? Secured creditor, no need for judgment Unsecured creditor, magistrates court – judgment and warrant of possession 2. Who can take a house and when? Houses: Mortgagee – straight to supreme/county court Unsecured creditor - Bankruptcy notice

23 Ways of getting income Instalment orders A payment planPaid within a reasonable time (including interest!) Attachment of earnings/garnishee orders Employer pays the creditor Often called garnishing wages. Attachment of debt: Money your client is owed paid to the creditor e.g. bank account, employer

24 Ways of getting property - WarrantsWarrant for Seizure of Property: Goods – cars, boats, cash etc Warrants of Seizure and Sale – homes – writs through Supreme Court or County Court NOTE: These warrants don’t involve seizure of land

25 Bankruptcy Who has had a client who has had a bankruptcy.

26 Enforcement All of those things need to happen before the creditor can go and get a warrant Magistrates Court Debts up to $100,000 (including secured). Attachment of earnings – known as garnishing wages Garnishee order – taking money from a bank account or owed by another Warrant to seize (personal) property – cars, cash, art etc. Note exceptions in Bankruptcy Act. Supreme or County Court Debts over $100,000 – mostly home loan cases Home repossession Mortgagee – straight to supreme/county court Unsecured creditor - Bankruptcy notice Car/asset repossession Secured creditor, no need for judgment Unsecured creditor, magistrates court – judgment and warrant of possession

27 Case Study 1 What information would you get to help this client?Does Client have any arguments that Big Bank have breached the law? How (if at all), can Client use the legal arguments against Big Bank to improve his position? Client contacts you 6 months later after he receives a visit from the Sheriff advising that the car is to be seized. What are his options? LE and Annette to Facilitate FC answers. To provoke these, consider below: He tells it’s a secured loan. His income, he tells you it is a for three months in his first job, He had no guarantee of on-going employment. Yes – responsible lending, maladministration, missold CCI insurance as it would not apply to someone working casually. Harassment – the three dot points are misleading or deceptive. He can claim compensation for non-financial loss for harassment. This can open avenues for monetary compensation that may be used to reduce his liability. That is, he can argue breach of the ASIC/ACCC debt collection guidelines and complain to FOS – note FOS determination where up to $3000 per incident of harassment was awarded. Negotiate a reduction in payment amount, or Complain to FOS on this basis. Note likely outcomes of responsible lending are to repay the benefit ($21k – minus CCI being $19,500 then minus what he has paid. IF the car was sellable it’d be sold and offset against the benefit. The difficulty here is it is irreparable. A long term repayment arrangement may see him avoid having bad debt… Throw over to the sheriff. Judgment will have been entered. He has limited rights here, the car will be sold and the residual will remain a judgment debt recoverable by other means e.g. instalment order, garnish wages etc

28 Case Study 2 What information would you get to help this client?Does Client have any arguments that The Bank or the Broker have breached the law? Before judgment, what were client's options? Client asks you to negotiate with The Bank. After protracted negotiations, the bank instructs the Sheriff to change the locks on the property. Client wants to get back in the house, what are his options? LE and Annette to Facilitate FC answers. To provoke these, consider below: Court, debt, etc request documents Responsible lending, maladministration. (a) Informal negotiations to remain in the property for the short term (b) complain to FOS - but where does this get him if he cannot afford it? The usual EDR approach is to require him to repay the benefit and for the ppty to be sold (c) bankruptcy?! Legally very limited bargaining position. I think the chances are slim that he could negotiate with the bank on compassionate grounds for a long term sustainable arrangement. Otherwise, the sheriff will likely sell the property and he is left a shortfall and significant unsecured debt. Note the sheriffs obligations in selling the property.

29 Session review We discussed:the process from entering a contracts through to the court process what debt collectors can and cannot do being judgment proof and negotiation skills what you can do when your client is sued, and before judgment. after Judgment - how the enforcement process works

30 Any questions? Consumer Action Law Centre Level 6, 179 Queen StreetMelbourne VIC 3000 Worker Advice Line: (03) Rural access: