Credit Matters Blog

In Defence of Debt Collectors

Kim Radok 01 July 2011


Debt collectors play a major, and essential role within the business community. Their role is to assist business owners get paid for the goods and services they sell to their customers on credit.

So why are debt collectors so vilified? The simple truth is, many debtors will borrow the money or use a business's products, but they do not want to pay for these products.

Over the years, governments and the media have too often accepted the few stories that make debt collectors look bad, as though all debt collectors operate this way. The media also, too often, DO NOT properly report or investigate  many of their stories. The results of such actions and biased stories are designed to present a picture showing all debt collectors in the negative.

As a consequence of vested interests, governments and bodies such as the ACCC, they then pass debt collection process  laws which inhibit the successful collection of genuine debts. At the same time, their efforts to 'encourage' debtors to accept their responsibilities are laughable at best.

A perfect example was the material presented by the ACCC/ASIC in their booklets from 2005, Debt Collection guidelines: for debt collectors and creditors and Dealing with your debt: Your rights and responsibilities.

When you review these booklets, you start to see a bias against the lawful collection of debts. Debt Collectors have approximately 70 pages of thou shall not do’s or must do guidelines. Meanwhile in about 30 pages of "Rights" Debtors are directed to their responsibilities in one paragraph. 

Notwithstanding these guidelines were designed for the consumer world, and the guidelines were designed to protect consumers, there was one major flaw with the theory.

Only one side was penalised by legislative support - debt collectors. There were no similar legislative penalties for fraudulent and vexatious consumers. Such an unbalanced perspective has only one outcome. Consumers soon learn they can flaunt their legal responsibilities to manage and repay their debts.

Matters have not improved much since in presenting a more balanced approach to collection of debts. Governments have over the years moved to create such a debt collection regime in regards to B2B.

The media in all its forms, like to present sensationalised stories of 'innocent victims' being harassed and hounded by heartless big business. Debt collectors and their actions fall into this category all too often. Again the stories are often poorly presented and the 'truth' often re-arranged to suit the intentions of the media stakeholders.

What the government and media often fail to do, is to review the debt collection industry as a business operating within a community. For instance, if you review most large debt collection firms, you will see they often sponsor the disadvantaged and support their community charities.

So what is the result of the sustained attacks against debt collectors and their industry? Four obvious situations develop and which impact on the business community as a whole:

1 Debtors sense if they tell their story of victimisation often enough, with suitable embellishments of course, their problems which were said to be caused by big business and debt collectors, will all go away.

2 Many business people find collection of their debts ever more complex, legalistic and expensive. Therefore they stop chasing debtors in the belief they are throwing good money after bad for a doubtful result.

3  The result of point two - the debtors continue to play their same games of buying, but not paying with some impunity.

4 If a business is unable to collect its debts often enough, and quickly, the result is either, they (i) stop extending credit or (ii) go out of business.

The final irony of course, governments need revenue from taxes and fines and media businesses need cash from extending credit for their products. So when their 'customers' don't pay, who do they call on to force payment - a debt collector!

Unfortunately, as governments and media companies are now also finding, the debt collectors they need, are less efficient at collecting their debts. The reason why this is happening; the friendly legislation and the biased stories now have the 'innocent debtor' believing they can avoid paying their debts.

A rather delicious outcome don't you think!

May you be paid today rather than tomorrow.

Kim Radok