‘Insidious and unsavoury’: how private debt collectors push vulnerable Australians to breaking point

<span>Private debt collectors’ conduct has left Australians feeling harassed, stressed and powerless.</span><span>Photograph: Gabe Palmer/Alamy</span>
Private debt collectors’ conduct has left Australians feeling harassed, stressed and powerless.Photograph: Gabe Palmer/Alamy

The debt collector’s calls had driven Zach Fakhri to the edge.

It had only been six weeks since the personal trainer received the bill for an ambulance trip, taken after he sustained significant injuries while intervening in a fight between his two dogs.

He could barely walk. He was unable to work and the $1,358 ambulance fee felt beyond his reach.

The money he had left was only just stretching to cover food, rent and bills.

Documents show that Fakhri was billed for the ambulance on 10 October last year and started receiving messages from Recoveriescorp, a private debt collector, just weeks later on 22 November.

Not even half an hour later, I got another phone call from the exact same company

Zach Fakhri, personal trainer

Victoria is believed to be the only jurisdiction in the country that outsources the collection of unpaid ambulance fees.

“With my injury, I only started walking a month later,” Fakhri says. “I got back to work way earlier than I should have because I knew I was so far behind.

“[It] shook me a little bit too because, of all people, I thought [the ambulance service] would have a bit more consideration of that kind of stuff.”

The messages from Recoveriescorp became overwhelming.

The Australian Competition and Consumer Commission says debt collectors must not make more than three calls a week.

At times Fakhri was getting that in a single day, he says. They continued even after he told one Recoveriescorp employee that he was seeking financial advice, which is supposed to prompt a pause on debt collection activity.

“Within the next hour I received another phone call from the exact same guy,” Fakhri says. “[I told him:] ‘You said you would put it on hold for three weeks.’ He said: ‘Sorry, it was an accident. I’ll update the notes in the system.’

“Not even half an hour later, I got another phone call from the exact same company but a different person.

“That really pushed me over the boundary.”

Such conduct is far from isolated in the industry.

Recoveriescorp said it couldn’t comment on individual cases but that it had “systems and processes in place to monitor compliance with the guidelines”.

Harassment allegations

Australia’s cost-of-living crisis has triggered concerns about the activity of private debt collectors among financial counsellors and the consumer watchdog.

The National Debt Helpline has “never been busier”, with calls up by 25% in the last financial year, according to Claire Tacon, Consumer Action Law Centre’s acting director of financial counselling.

“The people contacting us are more stressed, have more mental health issues [and] are more likely to be suicidal,” she says.

“Paying back old debts is not their priority in [a cost-of-living crisis]. And the extra stress that debt collectors bring – the constant phone calls in particular – to people who are already at breaking point drives more calls to our already stretched service. We are … referring more people to Lifeline than we ever have.”

Advocates and former staff also claim that oversight of the private debt collection industry is too lax – with one former debt collector calling it “a joke”.

They say unscrupulous behaviour is common, causes distress to vulnerable people, and that bad behaviour often goes unpunished. A Guardian Australia investigation has uncovered numerous examples of concerning practices across the industry.

Debt collectors have chased vulnerable debtors – including a 10-year-old with autism – for money they did not owe, made misleading and false threats about credit file listings to non-English speakers, used fake social media profiles to find missing debtors and employed underhanded tactics to extend the time limit on collecting debts, according to victims, lawyers and debt collection insiders.

In one case, a retired couple in Victoria say they were harassed for weeks by Marshall Freeman Collections Pty Ltd over a disputed debt relating to work on their home.

The couple were also told they must pay hundreds of dollars to cover the money the firm spent in trying to recover a disputed debt from them, an act prohibited by law unless debtors agree to it in their original contract. The couple claim there was nothing in their contract with the tradesman allowing Marshall Freeman to charge them from the costs of its debt recovery work.

Putting pressure on alleged debtor’s through friends or family members is particularly insidious and unsavoury behaviour

Rowan Kelly, Consumer Credit Legal Service

The couple, who requested anonymity, previously held senior roles in the public service, where they were involved in financial management and handling large government contracts with business.

Even with that experience, and postgraduate degrees, they say they were left feeling harassed, stressed and powerless by Marshall Freeman’s pursuit of them.

“For others, it might be even worse,” the husband says. “That’s a massive power imbalance. And when you have a power imbalance, you have injustice.”

The couple say they felt forced into paying what Marshall Freeman was demanding to stop the harassment, even though it was well in excess of what they originally owed.

Even after they paid, the couple say they continued to receive communications from Marshall Freeman that the debt was outstanding.

Marshall Freeman declined to comment.

‘Bad apples’

Rowan Kelly, a senior solicitor with WA’s Consumer Credit Legal Service, frequently advises clients who find themselves in a debt recovery firm’s sights.

Kelly says debt collection firms have an obligation to treat debtors with sensitivity and care, particularly in cases involving family violence.

“Unfortunately, we are not seeing some debt collectors meet this standard of behaviour, and see some debt collectors causing further distress to people experiencing vulnerability,” he says.

Kelly says he has seen “repeated and constant” flouting of the debt collection guidelines produced by the ACCC and the Australian Securities and Investments Commission, which are designed to guide the sector on consumer protection laws.

“One example of these guidelines being breached is debt collectors harassing friends and family members, even when they have the alleged debtor’s contact details or could easily find them,” he says.

“Putting pressure on alleged debtor’s through friends or family members is particularly insidious and unsavoury behaviour, and needs to be condemned.”

He has seen some debt collection firms falsely tell debtors that if payment is not made a default will be listed on their credit report, jeopardising their credit rating.

“This statement is misleading and is incredibly concerning to the alleged debtors,” he says.

In other cases, he says firms try to trick debtors into responding to correspondence about historic debts, something that automatically triggers an extension to the usual six-year time limit on debt collection activity.

He says firms are also filing legal proceedings but not serving the court documents on debtors, a tactic that allows them to extend the six-year time limit.

“We imagine debt collectors are doing this to avoid a debt being statute barred while simultaneously not wanting to incur the costs and effort of having to run court proceedings,” he says.

The sector is largely regulated by the ACCC, although the consumer watchdog does not investigate complaints about debts related to financial services or products.

A spokesperson said the ACCC was aware of the potential for increased debt collection activity due to cost-of-living pressures.

“The most common reports received by the ACCC about debt collection include consumer allegations that they are being pursued for debts that they do not owe,” a spokesperson said.

The former ACCC chair Graeme Samuel says complaints about debt collection activity inevitably rise in times of hardship.

During his time at the helm, he says, he frequently warned the sector it needed to stamp out misconduct typically contained to a minority of unscrupulous operators or “bad apples”.

The ACCC, while effective, took significant time to investigate complaints and take matters to court, he says. That delay – while necessary to allow proper investigations – could have serious consequences.

In some cases, he says, debtors took their own lives while the ACCC was investigating a debt collector’s actions.

“This was unfortunately the sort of thing we faced over and over again, and it’s heartbreaking when you see it.

“But all you can do is get the message out and ensure that, if a problem does arise, that very, very quick action is taken.”

Surging complaints

The Australian Financial Complaints Authority says it received 1,338 complaints about debt collectors or buyers in 2023, up from 1,222 the year before – an increase of almost 10% – although these figures are disputed by the sector.

“Complaints have increased across most areas in our banking and finance jurisdiction, reflecting in part increasing financial stress in the community,” Afca’s lead ombudsman for banking and finance, Natalie Cameron, tells Guardian Australia.

She also acknowledges that specific complaints about “inappropriate debt collection activity” fell in 2023.

“Examples of inappropriate activity include intimidating communication, not taking care with vulnerable consumers and debt collection activity occurring while an AFCA complaint is still open, which is not permitted,” she says.

Related: Why Guardian Australia is investigating the private debt collection industry

The debt collection industry disputes the suggestion that its conduct has worsened during the cost-of-living crisis.

The industry peak body, the Australian Collectors and Debt Buyers Association, says its analysis of Afca data shows that complaints have been steadily falling but its analysis does not count complaints that were resolved at an early stage by discussions between the debtor and debt collector.

The industry says only a fraction of its interactions with debtors lead to a complaint and, of the few complaints that are lodged with Afca, fewer than 1% result in any finding of fault by the debt collector.

“Our review of the [Afca data] shows a strong and consistent trend of year-on-year reduction in complaint volumes in line with the continued investment of our members in compliance systems and processes,” says the association’s chief executive, Jacob Maiore.

“ACDBA members pride themselves in delivering compliant collections outcomes in line with the laws and guidelines governing the collections industry.”

Maiore says his members, which include Panthera and Recoveriescorp, have made significant investment in training and systems to ensure compliance and were subject to “rigorous oversight by AFCA, ASIC and the ACCC, amongst others”.

He says he is surprised to hear the criticism from WA’s Consumer Credit Legal Service and says it has yet to raise its concerns directly with the peak body.

Recoveriescorp said it was committed to treating customers with respect and acted in accordance with the ACCC debt collection guidelines.

“Recoveriescorp has systems and processes in place to monitor compliance with the guidelines,” a spokesperson said.

Do you know more? Contact christopher.knaus@theguardian.com