Following is a transcript of the interview, broadcast across Australia in January 2017 via the CBAA's Community Radio Network.
BARRY: Legal bullying may come from a Government agency, large companies or wealthy individuals who have the resources to pay lawyers to assert their power These lawyers may well know all the tricks of the trade to frighten people unnecessarily and/or get them hooked into a process of litigation that should never have been entered into by the respondent at all.
In this report, I’d like to look at some of the issues surrounding one particular type of legal bullying, that may more likely be experienced some listeners, that being, responding to heavy handed tactics by creditors or debt collectors. I spoke with Will Dwyer, the credit and debt solicitor at Redfern Legal Centre, who deals with a lot of clients who find themselves in this situation. I began by asking him how those who find themselves on the receiving end of legal bullying typically feel?
WILL DWYER: Well it's a very stressful situation for a lot of people, we encounter clients who are very anxious about their livelihoods, the fear of going to court really is a very strong fear and it's something that causes people a great deal of concern. Particularly when they don't know where in fact they stand, what their rights might be, and whether in fact their position is a strong one or not.
BARRY: What forms can legal bullying take in the context of corporate debt collection?
WILL DWYER: The most common thing we encounter is people who are in financial hardship, they're struggling to pay the bills, to repay loans, or accessing improper forms of credit, which are very costly, and which lead them paying a lot more for access to basic things, than in fact people with more financial resources tend to access.
So where people are in financial hardship and haven't met their repayment obligations, whether that’s under a loan, whether it's under an electricity bill, a mobile phone bill, or for example, repaying something like a consumer lease which is a very costly form of credit. The debt will be chased firstly by the company, and then quite often it’s either other sold off or collected by a debt collection agency on behalf of the company.
The debt collection process really takes the form of contacting a debtor and applying pressure to them to get them to repay a debt. People who owe a debt clearly can't pay the whole lot in one go, and it's even more difficult where they're struggling financially. So quite often a debtor will negotiate with a debt collection agency to repay debt off over several years or to repay it by installments.
BARRY: So how does legal bullying take place in this type of situation?
WILL DWYER: Well, most of the time, it really is about the pressure applied by a creditor, whether that creditor is a company, a bank, a debt collection agency, or a government agency, or just a general company who is owed a sum of money by a consumer.
BARRY: Typically what sort of threats would you receive in the mail?
WILL DWYER: Well the letters take a variety of forms; they're generally called letters of demand, where they set out a debt and set out consequences for non-payment of the debt. And quite often they're phrased in a way which makes it seem as though the debt collector is willing to take their claim to a court, to get a court judgment forcing a debtor to repay the creditor through the court process, when in fact it's very unlikely for smaller debts – certainly any debt less than $5000 – that a creditor or a debt collection agency will in fact litigate the debt to seek a court judgment to repay it, because there are significant costs in obtaining a court judgment in terms of resources, legal costs, as well as uncertainty around recovery.
BARRY: What rights to people have when they find themselves in a situation where they can't repay their debt and they're being threatened in this way?
WILL DWYER: There's a whole host of rights really, and at the end of the day people can't repay money that they don't have, and people need to prioritise their basic living expenses. You know paying the rent, paying the bills, putting food on the table, before making repayments to any sort of debt collector. So, the debt collection agencies recognise this, as do banks and other creditors, that they can only really negotiate with people to repay a fair an appropriate amount of a debt, and to do it on fair terms, over an appropriate length of time. So there are quite a lot of rights, which people who receive letters of demand have and they range from having the right to maintain a basic living income, and to get advice, on really, the nature of their debt.
Whether there’s scope for negotiating to pay a reduced amount of the debt; to putting a hold on interest fees and charges which accrue, along with a debt; or to convince a debt collector that someone is in such financial hardship that they have no capacity to repay a debt, and that debt should be written off or waved, which is something which we regularly assist clients to negotiate.
BARRY: Would it be advisable to tell people if they're really difficult circumstances to declare bankruptcy?
WILL DWYER: Bankruptcy is always the last resort, but it is certainly something which either the debtor can do on their own behalf, or it's something where a creditor can also initiate, where someone has a judgment debt for more than $5000. But again there are significant costs to a creditor to wind someone up for bankruptcy, in terms of the legal costs and the resources to do it. It would probably cost an organisation $2000 or $3000 in legal costs to petition for someone's bankruptcy. And they’re unlikely to make that decision to bankrupt someone, unless there are assets, which they are likely to be able to recover their debt from. So quite often it's property, real estate, or luxury goods, which can be, which are provable assets in bankruptcy, and which will be sold by a trustee to repay the creditors. But if someone doesn't have an interest in real estate, and they don't have any valuable assets, then really there's no point in a creditor bankrupting them, because they unlikely to generate any return.
BARRY: What sort of tricks to lawyers typically use to get their way in the power game that is legal bullying?
WILL DWYER: So in the context of debt recovery, much of it revolves around what is said in a letter of demand, and how it's phrased in terms of a debt collector’s intentions to commence legal proceedings to recover a debt. The letters of demand will always say that the creditor or the debt collector may commence legal proceedings to recover a debt. But in terms of weighing up the costs and resources of litigating a debt, versus the actual return that someone might get through that process. Really, it's rarely worth a debt collectors while to seek a judgment on a debt, unless it's worth at least $5,000 or $10,000 dollars, and they think that there is some money which the debtor has, which they can access through a court enforcement process. So the court can enforce a judgment debt by issuing garnishee orders on someone wages or on their bank account, which is a court order ordering an employer or a bank to repay some money directly to the judgment creditor. But there are protections in the law in the civil procedure and protections for Social Security against those types of orders, that Social Security income is protected from these garnishee orders, and the garnishee orders also need to leave a minimum saved amount in a bank account to allow someone to manage their basic living expenses.
BARRY: So practically speaking, if you're living on Centrelink benefits and you find yourself in this sort of situation, you need not worry that your Centrelink benefits are going to be touched?
WILL DWYER: Well, it’s always a cause of concern. The protection against Centrelink benefits from garnishee orders differs in different states, and there is the least protection in New South Wales in terms of the civil procedure. So the protection only lasts as long as that money is characterised as Social Security, and after it's been retained in someone's bank account for more than four weeks, it's no longer defined as Social Security income and can be garnished through that process. But it's unlikely that a creditor will pursue someone who is solely reliant on Centrelink income, where they're a prise to that fact, and where particularly they have a financial counsellor or community legal Centre intervene.
Because by having an advocate represent someone to a debt collection agency, the power imbalance shifts significantly. And a lawyer or financial counsellor is well across the debt collection guidelines which ASIC and the ACCC publish in terms of limiting the type of contact between debt collectors and the people they're pursuing and regulating the types of things which can and can't be said, in those sorts of letters of demand.
BARRY: Are there times when letters of demand simply should be ignored, and when should you ignore a letter, and when not?
WILL DWYER: So probably the crucial time period at least, is a statutory limitation period on recovery of the debt. So in New South Wales, a civil debt can only be recovered for six years, from the time someone has either accrued the debt, last made a payment on the debt, or acknowledged the debt. So that clock will restart each time you either acknowledge or make a payment on the debt. So if you get a letter of demand from a debt which is approaching five or six years old, at that point it's crucial not to acknowledge the debt, not to respond to the letter of demand or in fact do anything, because you don't want the clock to reset, and you want to get the protection of the statutory limitation period. It's important to distinguish between a letter of demand and statement of claim, which is the initiating process in a court, where a statement of claim requires you to file a response, a defence or something within 28 days. And if you don't respond to a statement of claim then it's likely the other party will get their judgment by default. A letter of demand is not a statement of claim and any letter of demand which is designed to look like a court document, or which misrepresents a debt collectors intention to start legal proceedings, will likely breach the ASIC debt collection guidelines and may also breach the Australian consumer law.
BARRY: Should people be frightened of debt collectors, can they come and knock on your door and get your furniture and goods and try and sell them?
WILL DWYER: So they certainly can't enter your house or seize and sell property. They can approach you at home in certain circumstances and they can call you with a certain frequency. The ACCC and ASIC debt collection guidelines, limit the time of day or night when debt collectors can call, and the frequency with which they can make the calls. It's also important to note that if you dispute liability for debt, then a debt collector can't continue to pursue you for that debt through that process. That really the key thing to do where a debt collector is calling you regularly, is to ask them for proof of the debt and to request that all communication with you is in writing and to explain that you're going to see a financial counsellor or a community legal centre and you're obtaining advice and that they should not contact you, over the telephone, and they should put to you their evidence of the debt in writing and when you've had a chance to get legal advice you can respond to them appropriately.
BARRY: What should listeners do if they find themselves in a legal bullying situation over debt recollection?
WILL DWYER: Really, the best way to get some relief is to get good advice to know where you stand, and which tempers some of the urgency with which these letters of demand seem to create. So the best way to do that is to get in touch with a financial councillor or a community legal centre, both of which are always free services. There is a national debt helpline. It’s 1800 007 007, which is a free service which people can access over the phone, where they can speak to a financial counsellor or a community lawyer, to get advice about where they stand, over the phone.
BARRY: What if you’re in a remote location and there are no free legal services nearby?
WILL DWYER: So probably the best way to access it is either online. There is some really good material online either through the Financial Counsellors’ Association, individual community legal centres, fair trading organisations, or financial and consumer rights specific legal centres. Where there is self-help material online, there’s fact sheets and guidance about where you stand in terms of dealing with debt. Or, through the national debt helpline where you can call that number during business hours and speak directly to a financial councillor free of charge. That's really the most practical way to get some helpful advice.
Don't feel pressured by letters of demand because often their bark is worse than their bite and you have a lot of leeway when it comes to negotiating with your creditors. And if you simply can't repay a debt and you're unlikely to be able to in the future, then the debt collector will ultimately recognise that on a commercial basis.
BARRY: Those help details again, The National Debt Helpline can be contacted on 1800 007 007. The Financial Counsellors Association can be accessed through the internet at www.financialcounsellingaustralia.org.au - there you will find links to local financial counselling services in your state or territory; or you contact a local community legal centre for further advice on financial hardship issues and the law.
If you need legal advice about a credit and debt matter and you reside in NSW, contact RLC on 02 9698 7277 (catchment and eligibility criteria may apply).
