Now debt collector may owe consumers
By Kirsty Needham Consumer Reporter, August 19 2005 Sydney Morning Herald
A debt collection agency that caused people to be turned down for home loans because of old telephone bills that were in dispute, or not owed, will be made to reimburse consumers' legal costs and set up a complaint hotline.
Alliance Factoring was accused of harassment as it hunted down $300 million in old Telstra debts. The Australian Competition and Consumer Commission said yesterday Alliance had undertaken to change its practices, which allegedly included chasing debts that had already been paid, using abusive language, contacting consumers at work, and frequently phoning and text-messaging them.
The commission chairman, Graeme Samuel, said poor debt collection practices often severely affected a consumer's emotional and physical wellbeing, and their ability to obtain future finance.
Telstra sold 800,000 old debt files to Alliance Factoring in 2002. Within months, complaints to the Telephone Industry Ombudsman about Alliance had soared, and continued to rise during 2003. The standard letter sent by the company threatened to list consumers within 14 days as defaulters on Australia's largest credit rating database, which was owned by Alliance's parent company, Baycorp.
The Privacy Commissioner intervened to force Alliance to extend the period to 28 days, arguing that people needed more time to verify details of old debts that could be incorrect. The complaints continued.
The competition and consumer commission said Alliance must establish a 1300 hotline for a year for consumers to dispute claims of money being owed. If they can prove the money is not owed, Alliance must remove the default listing and reimburse the consumer's costs. The company will review its letters and call guides and hold an independent review of procedures each year.
"The undertaking will redress or remove the risk of future harm to vulnerable and disadvantaged consumers," Mr Samuel said.
Karen Cox, co-ordinator of the NSW Consumer Credit Legal Centre, said: "Obviously it is welcome, but it is an indication of how badly we need something to improve standards, such as a mandatory code of conduct."
The general manager of Baycorp, Stephen Benton, said the company had made changes to Alliance's collection methods and would improve training and monitoring to "significantly reduce the risk of such situations occurring in the future".