Debt collectors dress up to look similar to police, with secret-service style earpieces and flak jackets, report says

Monday, 11 October 2021

“Disturbing and sometimes illegal” debt collection practices are revealed in a report from budgeting agency Christians Against Poverty.

It claims some debt collectors dress up to look similar to police officers, or court officials, sometimes even donning Swat-style clothing, secret-service style earpieces, and flak jackets.

Christians Against Poverty (Cap) said threatening behaviour, and oppressive tactics such as telling people they could have all their household goods stripped from their homes, or their photographs published in local newspapers.

It's the second damning report on debt collection practices released recently by budgeting agencies, following the late September publication of a report last month by the Fincap national budgeting network.

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Fincap and Cap have called on the Government to urgently pass laws reforming debt collection, bringing them into line with Australia, and protecting vulnerable families on low incomes.

Other practices they decried were debtors behind on their repayments being bombarded with multiple phone calls on a daily basis, as well as receiving calls at work.

This included using automated calling systems to make multiple daily calls to some debtors’ numbers, Cap said.

There were also instances of debt collectors revealing personal information to debtors’ family, neighbours and employers, Cap said in its report.

Michael Ward, Cap social policy adviser said the tactics, which were often the end result of irresponsible lending by lower-tier lenders, was harming vulnerable people.

The harm of abusive debt collection tactics fell hardest on Māori and Pasifika families, Ward said.

“By the time people call us they’re distraught, living in constant fear and experiencing poor emotional and mental health.

“Family relationships are often strained or broken, and they’ve almost always been pushed into further financial hardship,” he said.

Debt collectors did not appear to be constrained by lending restrictions on only charging reasonable fees, and once people's debts were passed to debt collectors by lenders and the likes of power companies, they could quickly inflate through added fees, Ward said.

“Aggressive debt collection practices are designed to intimidate and exhaust people into unsustainable payment arrangements​.

“People experiencing financial hardship often don’t have the confidence or energy to negotiate a fair and reasonable arrangement in the face of such behaviour, and are less likely to complain to the authorities.

“In our experience, debt collectors tend to exploit this fact and push them even harder than usual,” Ward said.

Law changes were the way to strengthen responsible lending rules, but regulation of debt collection practices was needed, he said.

Cap was calling for the criminalisation of harassment by debt collectors, and more clarity around what constituted harassment in the Fair Trading Act.

Cap also wanted to debt collectors to be licenced, and subject to binding codes of conduct.

This would include setting strict limits on how often, when and how debt collectors and lenders could contact debtors, limiting contacts to within normal hours and not at their work, and respect privacy.

Cap also wanted debt collection fees to be regulated.

All debt collectors should also be a member of an approved dispute resolution scheme, just as lenders must be, Cap said in its report.