COLLECTOR

A person collecting a debt in the course of a business and includes creditors, independent debt collection agencies, lawyers, government and court officials, and persons collecting on behalf of others where either the collector, or if the collector is an agent, its principal, is a corporation  

COMMUNICATE

Unless otherwise specified, includes communication by telephone, mobile telephone, fax, email, letter, and telegram  

DEBTOR

A natural person (or small company debtor) obligated or allegedly obligated to pay a debt. It includes a co-borrower or guarantor of the debtor.  

REASONABLENESS

Assessed according to an objective standard, taking into account all relevant circumstances  

THIRD PARTY

Any person other than the debtor, but does not include a debtor’s legal representative, trustee, or other authorised representative, or a guarantor or co-borrower. Nor does it include a related entity of the collector  

COMPLIANCE GUIDE

Prepared by the Australian Competition and Consumer Commission for businesses that collect debts and has four sections:
Use this guide in conjunction with ACCC’s guideline  Debt collection and the Trade Practices Act . Organisations can refer to the Australian Standard on Compliance Programs (AS 3806–1998) for more information on compliance.

The following explains how a business involved in collecting debts can implement these elements and some practical examples to assist business.  

Step 1         ESTABLISH COMMITMENT TO COMPLIANCE

For compliance with any obligation to be effective, all levels of the organisation must be  committed  to respecting the prohibition that the law contains, whether the prohibition is in the Trade Practices Act or other legislation. The commitment to compliance and to an appropriate compliance system must be apparent in all levels within the debt collection organisation, starting with the board and the chief executive officer (in the case of a large firm) or the managing director (in the case of a smaller firm). Once this commitment is in place, ultimate responsibility for a breakdown in compliance will rest with upper management. Upper management must be willing to say that ‘the buck stops here’.

Examples

The commitment of upper management is demonstrable by:

• Making sure that compliance is a standing item for board or board committee meetings (in the case of a large organisation)
  
• Appointing a compliance manager or a senior manager (in the case of a large organisation)
  
• Appointing a manager or supervisor with responsibility for compliance (in the case of a smaller organisation)
  
• Having appropriate compliance procedures in place
  
• Ensuring that these procedures are visible, maintained and well-resourced and
  
• Ensuring that these procedures are well publicised and understood by employees and agents
  

 

Step 2         ALLOCATE RESOURCES AND AUTHORITY FOR COMPLIANCE

To ensure compliance with section 60, as well as other laws and regulations, the organisation must provide adequate compliance resources. It must ensure that the individual (or unit) responsible for compliance has sufficient authority, recognition and support within the organisation to make compliance a priority and to make it stick.

This means that the organisation must decide to allocate personnel, time, and money to the compliance effort. For example, it should charge a person (or unit) with responsibility for compliance activities. Those people must have sufficient time and training to discharge the compliance functions properly. In addition, the organisation needs to allocate resources to train all staff (not just the compliance managers) about their responsibilities.

Example

Many large financial institutions have a dedicated compliance manager whose job it is to make sure that the organisation complies with relevant laws. In this context, responsibilities would include ensuring that systems are in place to follow ACCC guideline for ongoing training, and for monitoring and reporting on compliance issues. Smaller organisations should have someone whose duties include compliance.  

Step 3         ASSIGN RESPONSIBILITIES FOR COMPLIANCE

The necessity for compliance must permeate the consciousness of staff at all levels of the organisation. To this end,  all  managers must understand, promote, and be responsible for compliance with section 60 insofar as it applies to activities within their day-to-day responsibilities. Managers must be responsible for:

• Training staff under their immediate supervision about their responsibilities under section 60; and
• Ensuring that relevant compliance procedures are in place and maintained
   

Step 4         IDENTIFY COMPLIANCE ISSUES AND AREAS OF RISK

To ensure that compliance is not left to chance, relevant business units within the organisation should be assessed to identify relevant compliance issues. This includes identifying aspects of current operations and procedures that may be at risk of contravening relevant obligations. This identification process is overseen by those responsible for compliance in the organisation.

Examples

For compliance with section 60 of the Trade Practices Act, some issues to consider include these.

• Who is responsible for contacting debtors?
• How staff is made aware of their responsibilities under section 60?
• At what times, and with what frequency, do staff members telephone debtors?
• What procedure personnel follow if a request is made that contact not be made at a certain place or time?
• Do staff members visit debtors in their homes and, in what circumstances?
• What procedures do staff members follow if a debtor requests contact is only made through the debtor’s representative?
   

Step 5         DEVELOP OPERATIONAL AND TRAINING PROCEDURES

This is likely to be the largest task involved in developing an effective compliance system. However, once appropriate procedures are in place, ongoing maintenance requires limited additional work.

To ensure that compliance becomes an integral part of normal operations the requirements of section 60 (and other relevant laws) need integration into the organisation’s day-to-day operating procedures. A person who has detailed knowledge of the legislative requirements must be responsible for ensuring that these requirements are built into the organisation’s debt collection practices. The procedures to ensure compliance should be developed and implemented in consultation with staff and (where relevant) third parties, such as major clients.

In considering appropriate operational and training procedures, it is important to recognise that different risk areas may require different compliance approaches. Some risk issues can be best addressed through  training  staff on appropriate or inappropriate behaviour. Training must be aimed at relevant staff, must be ongoing, and must be tested for understanding.

Example

Many section 60 issues can be traced back to the manner in which contacts with debtors are handled. Staff whose responsibilities include contact with debtors should be given appropriate training on the organisation’s procedures for contacting debtors (in line with ACCC guideline). Training on communication and negotiation skills will be of great assistance. Some further examples of operational procedures relating to training are outlined below.

Examples

1     Staff members require training about their legal compliance responsibilities. The person responsible for compliance should establish and update a register of those trained. Any questions asked during training and the answers given to those questions should be recorded on the register. A training register is a mechanism allowing the organisation to be sure that:

• It has trained all staff affected by the law; and
• Those trained actually understood the training.

2     Distributing a training review form to each staff member undergoing training helps to improve staff understanding of the compliance message. Such a form allows the trainee to evaluate the training and record their views as to the clarity of the training. The trainer should review all forms and the training program where appropriate.

In addition, the compliance manager needs to establish procedures that advise of any changes to the relevant law. Once the impact of the legal changes upon the organisation’s operations has been assessed, the compliance manager must ensure that all affected staff are re-trained or otherwise informed. The training register needs updating to reflect the re-training and again, questions asked and answered should be recorded.

Other risk issues may be better addressed by developing appropriate  procedural systems.

Examples

The risk of misleading or deceptive communication can be limited by implementing a procedure for standard form letters and other communications checked by a person with trade practices expertise.

To ensure that contacts with debtors if outside reasonable hours only in appropriate circumstances, an organisation can consider implementing a checklist completed before making such contacts.

Any procedural manuals should be consistent with ACCC’s guideline on  Debt collection and the Trade Practices Act .

There are a number of other issues that should be addressed when developing appropriate operational procedures.  

IMPLEMENTATION AND ENFORCEMENT MECHANISMS

Once the compliance system has been established, it should be consistently enforced with appropriate remedial measures. Establishing a system requires the business to decide on the measures that it implements if an employee or an agent is in breach of compliance obligations. Effective sanctions or remedial measures can ensure that the compliance system retains credibility and effectiveness. As discussed above, continuous training should take place where appropriate.

Example

An agent of Debt Collectors Pty Ltd collects a debt by ringing the debtor at home at 11.00 p.m. every night for three weeks. Such conduct is likely to amount to undue harassment. Not only will it probably breach section 60, it breaches Debt Collector Pty Ltd’s clear company policy not to telephone debtors after 9.00 p.m. at night.

An appropriate response to such a contravention might be, first, to explain the error and provide re-training. Secondly, the agent could be warned that repeat conduct can result in a reduction in commission or, if the behaviour continues, termination of the agency contract.  

RECORD KEEPING

Accurate and up-to-date records of the organisation’s compliance activities are needed to assist in the monitoring and review process. An organisation should develop appropriate record keeping systems and procedures. Establishing and maintaining complaints register should keep records of complaints about employee or agent’s behaviour. Keeping such a register allows the organisation to pinpoint compliance ‘trouble spots’ in its operating procedures. A training register is an effective mechanism for keeping track of the organisation’s compliance training program. Additionally, businesses should maintain accurate records of contacts with debtors, including times and dates of all contacts.  

COMPLAINTS HANDLING SYSTEMS

It is essential to have a visible and accessible complaint handling and monitoring system within the organisation, which records complaints from staff, customers, competitors, financial counsellors, regulatory authorities, industry complaint handling committees and consumer organisations. Such a system can readily identify a compliance failure that might otherwise go undetected. An effective system which records and identifies complaints can act as ‘early warning’ device regarding conduct which may ultimately be drawn to the attention of regulatory authorities or cause harm or damage to consumers. Instituting such a system is preferable to defending costly litigation. The Australian Standard on Complaints Handling (AS 4269–1995) sets down some criteria for effective complaints handling.

In the case of small firms a sophisticated consumer complaints system may not be necessary. Nevertheless, an appropriate person should be nominated to handle complaints and to keep a log of complaints and responses.

IDENTIFICATION AND RECTIFICATION

All compliance failures, once recorded, should be classified and analysed so that any problems can be identified and rectified as soon, and as effectively, as possible. In particular ,  systemic and recurring problems  are likely to carry significant risks for the organisation and can be more difficult to identify. Such problems can escalate over time and are more likely to attract the attention of regulatory authorities.

Example

Approaching the debtor’s children in an attempt to enforce payment of a debt may amount to harassment, particularly where the collector makes threats or misrepresentations to the child about the consequences of the parent’s non-payment. If an organisation’s employees engage in this type of conduct on a regular basis, the organisation is vulnerable to prosecution for breach of section 60. The organisation should take immediate measures to make it clear that such conduct breaches its compliance policy that there are sanctions for such conduct, and that repeat offenders will be dealt with expeditiously.

Operational procedures should have a mechanism for identifying and addressing systemic problems, as well as general compliance issues.

Example

Those responsible for compliance can regularly review complaints data and other compliance information to ensure that appropriate rectification action is taken, and that trends or issues are recognised and dealt with as they arise.  

KEEPING ABREAST OF CHANGES TO THE LAW

Legislation and its interpretation can change rapidly. Organisations therefore need to have systems, which enable them to receive timely and accurate advice of relevant changes to laws and codes.

Example

Systems to provide advice on changes to the law can incorporate:

• Making arrangements with legal advisers for regular updates
• Being on relevant regulators’ mailing lists
• Becoming a member of industry associations (such as the Institute of Mercantile Agents or the Australian Collectors’ Association)
• Subscribing to relevant information services and
• Attending industry forums and seminars

Reporting

Internal reporting arrangements must be in place to ensure that:

• The board and senior management are kept regularly informed of compliance activities
• All actual or potential compliance failures are being reported and rectified in an appropriate way and
• Systemic and recurring problems of non-compliance are reported to those within the organisation with sufficient authority to correct them.

Example

A report on compliance issues and activities can become a regular item on board meeting agendas, or in an internal newsletter. In smaller businesses, the managing director could be provided with a regular briefing.  

Step 6         DOCUMENT COMPLIANCE POLICIES AND SYSTEM

The Australian Standard suggests that an organisation should set out a compliance policy that clearly states the organisation’s commitment. The policy should set out exactly how that commitment is to be carried out.

The operational procedures to ensure compliance (as developed in step 5) should be documented. This will form the compliance system (or compliance program) for the organisation.

The organisation should establish appropriate requirements and procedures to ensure that its agents understand the company’s commitment to compliance and the consequences of failing to meet relevant obligations.  

MAINTAINING A COMPLIANCE SYSTEM

Once appropriate operational procedures have been developed and implemented, your compliance system needs regular maintenance to ensure that it does not become obsolete or ineffective. This section outlines the tasks that are needed to maintain an effective system.  

AUDITING

Compliance with ACCC guideline and with relevant laws should be regularly and randomly audited. Indicators of the level of compliance (and thus the effectiveness of the system) can be gauged through:

• The quantity of complaints received by the organisation
• The quantity of complaints received by ACCC or financial counsellors and
• The number of breaches of the guideline or law detected.

Any reports from regulatory or industry bodies of wrongdoing by the organisation’s debt collectors should be investigated thoroughly immediately, and rectified.  

CONTINUOUS IMPROVEMENT

For a compliance system to remain effective, it should be reviewed on an ongoing basis. Both the objectives of the system and the criteria against which its effectiveness is assessed should be re-examined at regular intervals.

Examples

In order to maintain an effective compliance system the organisation should:

• Keep abreast of compliance best practices (both locally and overseas)
• Foster a compliance culture within the organisation
• Employ people who have experience in and commitment to the continuous improvement of compliance
• Undertake specific training and retraining of staff
• Encourage innovation in compliance development, procedures and processes and
• Recognise exemplary compliance behaviour by teams, work units, and individuals within the organisation

REVIEW

An independent review of the compliance system, particularly for a large company, by an appropriately qualified compliance expert every one or two years helps to ensure that the compliance system remains effective.  

LIAISON

There should be ongoing formal and informal liaison by the organisation and its compliance professionals with regulatory bodies (such as ACCC) as well as industry associations. This helps the organisation to be aware of current problem areas and effective compliance methods. Depending on the size of the business, it may be useful to hold regular meetings with:

• State, Territory and federal regulatory authorities
  
• Relevant industry associations and
  
• Consumer and community organisations
  

Alternatively, it may be more appropriate to maintain informal regular contact with relevant organisations. Relevant information, such as industry and regulatory newsletters and publications, should also be readily available to those responsible for the organisation’s compliance efforts.  

ACCOUNTABILITY

The performance of the compliance program should be reported as specified in the compliance procedures. In the case of large organisations, performance should be reported to the board and chief executive officer. In the case of small organisations, a report to the managing director is appropriate.