The Federal Court of Australia has found one of Australia’s largest debt collection companies, ACM Group Limited, harassed and coerced debtors and engaged in ‘widespread’ and ‘systemic’ misleading and deceptive conduct when recovering money. The finding also applied to its predecessor Accounts Control Management Services.
The ruling was welcomed by the Consumer Action Law Centre. The Centre, which regularly deals with clients being chased for money by ACM Group, said the ruling confirmed what it had long suspected – that some of ACM Group’s debt collection tactics breached the consumer laws.
‘ACM Group has been on our radar for a number of years, so we congratulate ASIC for taking action against them, and we’re pleased that its enforcement work has been successful,’ said Gerard Brody, Consumer Action’s Director of Policy and Campaigns.
Consumer Action has provided ASIC with information on a number of cases where consumers have alleged misconduct by ACM Group and its predecessor. Such cases included allegations that ACM Group:
- unfairly threaten bankruptcy over small debts;
- threatened legal action in circumstances where the debtor’s income and assets were such that enforcement of a judgment debt would not be possible through courts;
- refused to negotiate reasonable payment plans, including demanding large amounts before agreeing to instalments;
- did not provide information about debts being sought, including breakdowns of how debts escalated with added fees and interest;
- inappropriately contacted employers and family members about personal debts; and
- threatened legal action when it had no plans of actually taking a matter to court (the Federal Court decision demonstrates that ACM Group rarely initiated proceedings, but routinely misled debtors about impending legal action).
[quote] Where we hear of debt collection conduct that is unreasonable in its frequency, nature or content, we refer them directly to regulators[/quote]
Mr Brody said it was pleasing that in the context of the legal action, ACM Group had revised its debt collection procedures significantly. He said it was significant, however, that the Court proposed injunctive relief, particularly to prevent ACM Group engaging in undue harassment or coercion in the future.
‘While the level of enquiries has reduced, our Centre has received calls about ACM Group this year and even in recent months. Where we hear of debt collection conduct that is unreasonable in its frequency, nature or content, we refer them directly to regulators’ said Mr Brody. Consumer Action also said this decision should act as a warning to large companies like banks and telecommunications companies that routinely sell debts to external collectors.
‘Firms that sell debts to external collectors should have adequate controls to ensure those collectors abide by the law. If a consumer disputes a debt being sought by an external collector, firms should consider buying back debts so that consumers can fairly resolve complaints and disputes with the original creditor,’ said Mr Brody.
[quote] no description of this call (and some of her later efforts) can adequately capture the offensiveness involved’.[/quote]
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’.
The Court found several instances of undue harassment or coercion, including:
- repeated threats to inform a debtors’s husband about her indebtedness in circumstances where her husband did not know about her debt and ACM knew that she did not want him to know about her debt
- 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
- telephone calls to neighbours and friends of a debtor
- a threat to issue a warrant for a debtor’s arrest
- 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 found ACM persistently misled debtors by implying that:
- ACM 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 the purpose of commencing legal proceedings (when they had not)
- ACM had decided to commence legal proceedings against debtors (when it had not)
- legal proceedings, including bankruptcy proceedings, would be commenced immediately (when they would not), and
- ACM would cause NSW Sheriff’s officers to attend a debtor’s home to serve documents (when no papers had yet been prepared).
In the judgment the Court found the misleading and deceptive conduct was widespread.
‘[T]he constant references to litigation were not an accident. They were the intended outcome of a house manual which promoted threatening litigation as a means to achieving recoveries. The operators were told to make references to legal proceedings and lawyers and it is only natural that this is what they did. For example, many faithfully drew on the imagery, referred to in the manual, of the uniformed Sheriff’s officer arriving in a marked car. What occurred was not just widespread, it was systemic,’ the Court found.
ASIC Commissioner Peter Kell said ASIC was committed to ensuring debt collectors operate professionally and efficiently, and consumers who find themselves in a difficult position financially can be confident they will be dealt with fairly and lawfully.
‘ASIC will not tolerate behaviour designed to intimidate and mislead debtors. This includes cases where the debtor’s family, friends and associates are also threatened with unreasonable behaviour,’ Mr Kell said.
The Court concluded that declarations of misconduct and injunctive relief, restraining ACM from future similar conduct, be granted.