Licensing Debt Collectors--The Australian Approach

I have been teaching American consumer law in Australia to a class of LL.M. students at La Trobe University. I have about 35 students from all over he world. For me, the most interesting part of the course is learning how other countries deal with consumer problems, and what problems exist in different nations. It is also interesting to see the alternatives used to resolve these problems.  A good example is how Australia deals with debt collection problems.

    With a booming consumer economy and increased consumer credit, you would assume more Australian consumers were defaulting on their obligations, and more collection efforts would be necessary. In fact, that is the case. I noticed that “help with debt collection problems” ads on TV were not uncommon. So is there a problem with overly aggressive debt collectors? I met with representatives of the Australian Securities and investment commission and asked them just that question. They replied that generally, they had good guidelines prohibiting offensive collection practices and they were complied with. Their law is substantively not much different from our Fair Debt Collection Practices Act, and I was surprised that it seemed to be very effective at curtailing almost all wrongful debt collection practices. I asked how they enforce the law so effectively? Were there lots of private lawsuits? Did the Commission have a large staff enforcing the law? The answer to both questions was no. Rather, the law is enforced through the licensing of debt collectors. Apparently the threat of losing a license, and being unable to do business, has been sufficient to keep collectors in check.  As other have suggested, (see Richard Isacoff's comments regarding payday lending ) licensing can work when regulation doesn’t

 

Comments

[Caloy]

I believe that a coin always has two faces, as much as we wanted to get the most suitable debt features for us, it is always somehow a bad idea for others. It is in this regard that I bet we should just have to work on what's currently at hand and make the best out of it.

debt collectors

[riisacoff]

Licensing would give a measure of control over the activities of U.S. based Payday lenders. It seems to be working in the mortgage industry, although there it appears the idea was to eliminate all small mortgage brokers and consolidate to banks or their subsidiaries

Payday loans can play a "good" role BUT the Lenders MUST submit to tight regulation. And, as with the mortgage brokers etc., Payday lenders must be required to post a bond, based on the size of their portfolio, to cover their transgressions. Further, they should be subject to audit in the same way mtge companies are.

Why is all of this needed - because the payday lenders are worse than the "street lenders". There you at least you know the rules, and even they say NO if you cannot afford to borrow.