For most small business owners, getting paid is very important. You don’t get paid, your own debts don’t get paid, your staff don’t get paid, and most importantly, you don’t get paid. Therefore your clients ability to pay you is paramount.
The idea of hiring a debt collection agency to collect from a customer sounds awful. As a business owner, you didn’t intend to get into business for the purpose of hiring an agency to go after people. But when your own efforts are going ignore and things need to happen, a debt collector may be your last resort.
Just the word ‘debt collector’ can carry some negative connotations for many people. We’ve all heard some awful stories relating to them, so let’s clear the air on what a debt collector can actually do, and is legally not allowed to do, and the negative stories which often come from overseas where the rules are different.
Debt collection agencies can do all the chasing so you can focus on the bigger picture.
What Debt Collectors CANNOT Do:
- They cannot use any physical force to make someone pay up. This would be classed as assault.
- Mislead, deceive or lie to you in order to get payment.
- They cannot make you bankrupt
- They cannot harass or chase your spouse, friends, or family members to get the debt nor can they mark them with bad credit unless their name is associated with the same debt.
- Cannot repossess any household items or cars unless they are used as security for the debt amount.
- They cannot arrest you and put you in jail, they are not the police, and debt in of itself is not a crime.
- They are not allowed to call you after 9pm or before 7:30am
- They cannot show up at your house or work if you refuse to see them.
The majority of debt collection agencies know these do not’s and they are very well defined by Australian law. Any breaches of it will carry penalties and reputation damage for the agency.
At the end of the day, they just want to collect the money owed which is the end result their client wants (which may be you as the business owner). No one wants to bully anyone for the sake of it. It can be an uncomfortable job for the collectors and no one wants to be there any longer than necessary.
With that in mind, here are things that collectors are within their legal rights to do:
- Demand a payment (obviously)
- Organising and proposing a payment plan if upfront payment cannot be made
- Questioning why the upfront payment or payment plan was not followed and actioned
- A maximum of 3 calls a week
- Following up if payments were not made within the agreed timeframes
- Calling between 7:30am and 9pm, Monday to Friday. On weekends, this time window is 9am to 9pm. Exceptions being public holidays, in which case, they aren’t working because they’re human too.
- Inspect and repossess any household items, cars, or other goods that were used as debt collateral
There you have it, all the clearly defined rules around debt collection. These laws are in place to protect both the debtor and creditor. Despite what you might think, debt collection is not a shady business, otherwise governments around the world would have made them illegal. At the same time, we must allow the debtor a reasonable amount of time and breathing room to pool their resources.
The best case scenario is that you either get paid or get smaller amounts streaming through to you on a regular basis via a payment plan. The absolute worst case scenario is if the debtor declares bankruptcy, in which case you are unable to chase the debt any more. It’s a bit more complicated than that, but you will have done all you can and it’s not a problem you can pursue any further.