Australians in financial distress are being hounded by debt collectors more than 65 million times a year, in the form of letters, emails, texts and phone calls, a new study shows.
Early findings from the first major study into the burgeoning debt collection industry, funded by the Australian Competition and Consumer Commission, reveal it is larger and more far-reaching than first thought.
"You've got $1.2 billion in revenue and over 8500 employees. The startling statistic is the number of contacts attempted by debt collectors every year is over 65 million," said Tim Lord from Anteris Consulting at the ACCC's National Consumer Congress in March.
"That doesn't mean every contact gets to the person – there could be disconnected phone numbers or letters going to wrong addresses. But when you think about how Australia's population is at 23 million, that's a lot of activity."
Gerard Brody, chief executive of the Consumer Action Law Centre, said it was the quality of the contact, rather than the number, that concerned him most.
He has seen "harassing" letters from debt collectors who have added recovery costs and legal fees with no explanation, doubling the amount originally sought.
"We often see letters of demand that are potentially misleading, that say someone's credit report will be effected, when sometimes that's not possible, that say they're going to take court action, when it's not economical for them to do that," he said.
Mr Lord said the "highly transactional" relationship between retailers and debt collectors, where big volumes of debt are sold or automatically referred, was worrying because the poor and vulnerable were slipping through the cracks.
In some cases, credit repairers were found to be preying on the vulnerable, charging them hundreds of dollars to clear their debt when it could be done for free.
In best practice, an energy retailer, for example, should help struggling customers repay their debts through hardship programs at no cost.
But Alan Harries, chief executive of the Australian Collectors and Debt Buyers Association, staunchly defended the industry, saying his organisation had received an extremely low level of complaints.
"In 2014, there were 14 complaints referred from the regulators. The vast majority have no factual basis. When a complaint's been investigated, it's very clear the collectors have not engaged in any unscrupulous or unreasonable behaviour," he said.
A report by the ADCBA, which represents 80 per cent of the industry, showed it collected $2.2 billion in 2013-14. Three quarters of the 65 million contacts were via phone call or text.
On Monday, the body released its first draft code of practice for wide consultation. "We've been very transparent. It's a very exciting time. We do see ourselves as extremely good corporate citizens that are working in a compliance-driven environment," he said.
One-third of complaints about debt collection related to harassment and coercion by collectors and creditors, an ACCC spokesperson told Government News last year. The next most common complaint related to misleading or deceptive conduct.
The study, which began in November, draws data from existing research, online surveys and formal interviews. It will be released in May.
An analyst from market research firm IBISWorld said an increasing number of bankruptcies, higher levels of household debt and growth in personal finance commitments had fuelled debt collection activity in the past five years.
"As economic conditions remain uncertain, more people and businesses will face financial pressures, which is expected to result in higher demand for debt collection services by creditors," he said.
"The industry is expected to undergo solid revenue growth at an annualised 3.5 per cent over the five years through 2019-20, to reach $1.4 billion."
