Archived Posts Lists

Australian Regulatory Compliance Review
Australian Technology and IP Business
Credit Union and Mutual Law
National Consumer Credit Reform
Personal Property Securities Australia
Longview Business Insights
Australian Private Health Insurers
Wills, Trusts, Super
Mutuals Resource Centre


Commonwealth legislation
Corporate Governance
Not-for-Profit links
Regulator Links

November 2, 2012

Case note: unlawful debt collection tactics

In Australian Securities and Investments Commission v Accounts Control Management Services Pty Ltd [2012] FCA 1164 the Federal Court found that debt collection companies, ACM Group Limited and its predecessor Accounts Control Management Services Pty Ltd, harassed and coerced debtors and engaged in misleading and deceptive conduct when recovering money.

ASIC claimed ACM breached section 12DA(1) of the ASIC Act and section 52(1) of the former Trade Practices Act as well as section 12DJ(1) of the ASIC Act.

ACM purchases outstanding debts from financial institutions and large corporates at a steep discount to their face value (typically a discount of between 79% and 99%), and therefore does not need to recover very much before it makes a profit.

The defendants submitted, relief should be withheld from ASIC for three related reasons:

  • First, viewed in their full context the contraventions were minor and historical;
  • secondly, this was particularly the case where the second defendant was a successor to the first defendant and where many of the breaches identified by ASIC related to the first defendant’s conduct and not its own;
  • thirdly, the internal arrangements of ACM had been altered to
    overcome whatever systemic difficulties there had been in the past – staff manuals had been revised and the staff in question had moved on.

ACM also argued that it was not providing ‘financial services’ within the meaning of the ASIC Act and that ASIC had no power in the matter.

The Court rejected all of these arguments although Judge Perram did modify the injunctions in respect of point 3.

ASIC presented to the Court 96 phone calls, mostly between ACM debt collectors and 8 debtors, and the ACM debt collector training manual that was in use at the relevant time as evidence of ACM’s conduct.

The Court concluded that declarations of misconduct and injunctive relief, restraining ACM from future similar conduct, be granted in the following terms:
The Defendants engaged in misleading and deceptive conduct by informing debtors who they pursued on unpaid accounts they had acquired from third party creditors that:
(a) they were about to sue them; or
(b) the file was in the hands of their lawyers; or
(c) a decision had been made to sue them; or
(d) they would shortly be served with Court process by the Sheriff
when none of this was true.

It also declared that:
The Defendants engaged in unduly harassing and coercive conduct while recovering debts from debtors which had been purchased from third party creditors by:
(a) heaping personal abuse upon them; or
(b) blackmailing them by threatening to reveal their positions as debtors to relatives, friends, employers or neighbours.

ASIC also sought injunctive relief.

Judge Perram observed:

"In the case of the unduly harassing and coercive conduct I think such relief should be granted. Its occurrence is more the result of a certain mindset amongst some of its employees. The only way that sort of bullying will stop is if the second defendant makes it stop. I do not think a declaration by itself will serve that end sufficiently. Without expressing a concluded view, the appropriate form of that injunctive relief is likely to be directed to the second defendant’s procedures, such as call monitoring, rather than a bare order not unduly to harass or coerce. ... The situation with the misleading and deceptive conduct case is less clear. That conduct was the result of the earlier manual and that manual has now been revised. ASIC did not point to any contraventions since that revision. Notwithstanding, I have concluded that injunctive relief should be granted. It will ensure that the second defendant gives effect to its manual. I see no utility in granting injunctive relief against the first defendant. "

Judge Perram also concluded that ASIC is entitled to pursue the defendants under the provisions of the ASIC Act as ACM's activities were related to financial services.

Print This Post Print This Post

Posted 2nd November 2012 by David Jacobson in Consumer Law, Corporations Act