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Debt Collection Is A Minefield That Requires Careful Treading, Particularly When It Comes To The Legalities…

Having unpaid invoices can be an unpleasant side effect of business, impacting your cash flow and leaving an unpleasant impression on your debtor’s reputation. If they fail to pay or satisfy the debt, you may be able to ‘collect’ it.

However, there are numerous legal obligations that you need to be aware of if this is a path you choose to take.

Debt collection takes place when creditors and collectors seek payment from consumers or businesses, who are legally bound to pay or repay the money they owe. There are specialists that can be employed to retrieve that amount of debt, who need to take care to adhere to the law.

When it comes to debt collection, those who are in debt to you need to be treated with fairness, respect and courtesy. It does not matter if they owe you millions of dollars, or if it’s simply a debt that’s gone unpaid for too long – the amount of the debt or length of time does not matter.

When collecting debts, you should never:

  • harass or coerce them
  • treat them unconscionably, such as by taking unfair advantage of their vulnerability or disability
  • mislead them about the nature of their debt, their legal obligations, or about what could happen if they do not pay.

Debt should not be pursued unless you have reasonable grounds for claiming that they are liable for the debt.

These reasonable grounds may include, for example:

  • giving information about the debtor’s account
  • making a demand for payment
  • accurately explaining the consequences of non-payment, including any legal remedies available to the collector or creditor, and any service restrictions that may apply in the case of utilities, such as disconnection of electricity
  • arranging for repayment of a debt

Under Australian law, a debt collector must not:

  • use physical force
  • use coercion, which is forcing or compelling the debtor or a third party, such as a family member, to do something
  • harass or hassle the debtor to an unreasonable extent
  • mislead or deceive the debtor, or try to do so, regardless of your intention
  • take unfair advantage of any vulnerability, disability or other similar circumstances affecting the debtor, as this could amount to unconscionable conduct (which can be legally pursued by the debtor against you).

If you require assistance with the recovery of debt or with managing your own debt, we are equipped to assist and advise. Come speak with us.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

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I have used Jane & the team for the last 6 years for all of my business & personal accounting needs. They have always been professional, easy to talk to & available when we have needed assistance.

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John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier