Having unpaid invoices can be an unpleasant side effect of business, impacting your cash flow and leaving an unpleasant impression on your debtor’s reputation. If they fail to pay or satisfy the debt, you may be able to ‘collect’ it.

However, there are numerous legal obligations that you need to be aware of if this is a path you choose to take.

Debt collection takes place when creditors and collectors seek payment from consumers or businesses, who are legally bound to pay or repay the money they owe. There are specialists that can be employed to retrieve that amount of debt, who need to take care to adhere to the law.

When it comes to debt collection, those who are in debt to you need to be treated with fairness, respect and courtesy. It does not matter if they owe you millions of dollars, or if it’s simply a debt that’s gone unpaid for too long – the amount of the debt or length of time does not matter.

When collecting debts, you should never:

• harass or coerce them
• treat them unconscionably, such as by taking unfair advantage of their vulnerability or disability
• mislead them about the nature of their debt, their legal obligations, or about what could happen if they do not pay.

A debt should not be pursued unless you have reasonable grounds for claiming that they are liable for the debt.

These reasonable grounds may include, for example:

• giving information about the debtor’s account
• making a demand for payment
• accurately explaining the consequences of non-payment, including any legal remedies available to the collector or creditor, and any service restrictions that may apply in the case of utilities, such as disconnection of electricity
• arranging for repayment of a debt

Under Australian law, a debt collector must not:

• use physical force
• use coercion, which is forcing or compelling the debtor or a third party, such as a family member, to do something
• harass or hassle the debtor to an unreasonable extent
• mislead or deceive the debtor, or try to do so, regardless of your intention
• take unfair advantage of any vulnerability, disability or other similar circumstances affecting the debtor, as this could amount to unconscionable conduct (which can be legally pursued by the debtor against you).

If you require assistance with the recovery of debt or with managing your own debt, we are equipped to assist and advise. Come speak with us.