Sometimes the misconception with overdue debts is â€œEC Credit Control or the courts will collect my money, no problem. I just send them a debt and they work their magic and I get paidâ€. If only it were true, credit reporting agencies such as Veda would be obsolete. The truth is there is no magic wand in debt collection and what may appear simple may in fact be quite complex. Therefore a lot of what you do at the outset as a creditor can have a big impact on the likelihood of a positive collection should a debtor renege on an invoiced payment.
How Do I Help EC Credit Control Help Me:
When submitting a debt for collection, the more relevant information we receive at the outset, the better. If a contract is held, send us a copy. Tell us if you hold a personal guarantee and provide a copy of that also. Invoices/statements/court judgements along with relevant correspondence that assists in proving the debt should all be provided with your debt for collection. This is because the onus of proving a debt lies with the creditor and debtors more often than not will at first deny knowledge of a debts existence or that they have signed or seen any documents of proof. Our technology is so fluid that if we already have this information scanned to the file we can provide same to the debtor at the push of a button while we still have them on the phone, thus denying some delay in having to come back to you to seek such documentation. The invoices you submit should add up to the amount you are seeking and should be made out to the correct debtor. If not there will be delays in processing your debt for collection. It is important that you ascertain who the correct debtor is at the point when the debt is incurred. This is particularly important when dealing with tenants/landlords and for subcontractors where there is a trend of issues arising as to who ordered or was responsible for the work. Remember if you cannot prove the debt when the debtor challenges it, we are less likely to collect the debt
How Do I Help Myself:
A signed contract will always be king. It does not stop a debtor disputing a debt but it does clearly show that they signed agreeing to your terms of trade which should include the ability to load a default, add interest, recover legal and collection costs amongst other important specifics. The timing of disclosure and acceptance of that contract is also important. Terms are only enforceable if they have been disclosed and accepted on or before the date the debt was incurred. You might have the perfect contract and terms, but if you disclose same after the debt is incurred, (i.e on the back of an invoice 30 days after provision of goods and services) the terms will not pertain to that debt. You can still pursue payment for the invoice concerned but there can be no costs/interest added and the debtor cannot be default listed.
What Else Should I Be Aware Of:
EC Credit Control and you as a creditor have to abide by a number of regulatory bodies, the main one of which is the ACCC. It governs what we/you can and cannot do in relation to your debtor including the timing and frequency of contact and what can and cannot be said.
Credit Reporting Agencies also have rules which we have to abide by around the provision of information for default listing. In particular they require EC Credit Control to have sighted a signed contract in order to default list a commercial debtor and that your terms of trade include a privacy clause in order to default list a consumer debtor. They will also not default list a disputed debt without a court judgement regardless of the quantum of the dispute. Their position is that they, nor EC Credit Control, nor the creditor have the authority to make judgement on a disputed debt, only the courts do.
Then there are various Acts such as the Privacy Act and some state specific acts that must be adhered to also. For example there are preconditions for disclosing default information for consumer debtors under the Privacy Act section 6Q which include:
â€¢ The debt must be over 60 days past due date
â€¢ Amount must not be less than $150
â€¢ Statute of Limitation must not have expired (usually 6 years)
â€¢ Credit Provider must have issued the required default notice (6Q)
The BASIC standard process from a credit providers point of view is as follows:
1. As soon as the debt becomes overdue the client should issue an overdue letter to the debtor at their last known address (6Q notice)
2. 60 days later they can submit the overdue debt to EC Credit Control for collection if it remains unpaid (note: a separate 6Q notice must be submitted for any current debt when it falls overdue, current debt is not deemed overdue at the same time as overdue debt)
3. EC Credit Controls first demand is then deemed to be a notice advising the debtor of a potential intention to disclose default information to a credit reporting body (21D(3) notice)
4. Between no less than 14 days and no more than 3 months after the 21D(3) notice, a default can be recorded with a credit reporting body if the debt is unpaid or no arrangement/dispute exists(Veda/D&B)
A section 6Q notice (overdue letter) sent to the debtor by a creditor should include:
â€¢ Heading â€œDefault Noticeâ€
â€¢ The overdue amount
â€¢ Last known address of the debtor
â€¢ Request for payment, payment options and date expected by generally 30 days from date of 6Q notice
â€¢ Notice that failure to pay may result in the engagement of a collection agent to recover the unpaid debt with the terms of the contract held to apply