A debt collection agency used by Telstra has lost a landmark case brought by Australia’s consumer and financial regulators.
The ACM Group, an outsourced debt collection service, was on Monday found by the Federal Court of Australia to have engaged in misleading or deceptive conduct, harassment and coercion, and unconscionable conduct towards vulnerable consumers.
Federal Court Justice John Griffiths found the recovery agency's pursuit of Telstra bills saw it relentlessly pursue a permanently disabled stroke victim confined to a nursing home and threaten a single mother’s access to credit.
The judgment is a significant win for the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC), who brought the case against ACM in June 2016.
It sets a precedent that high pressure debt recovery techniques are inappropriate and as such as significant ramifications for all consumer telcos.
While the telco debt collection sector has been under regulatory scrutiny for decades, the latest case [Australian Competition and Consumer Commission v ACM Group Limited] draws a firm line in the sand by effectively ruling out some common debt collection tactics.
Those practises are laid bare in the judgment as the intense pressure applied by ACM to the stroke victim, an individual identified only as “CT” who lived in permanent residential care and had very limited ability to speak.
The judgment paints a deeply disturbing picture, explaining that “ACM representatives telephoned the care facility in which CT lived on numerous occasions during 2011 to 2014, on each occasion asking to speak to CT."
"On at least 40 occasions in that period, ACM representatives spoke to staff of the care facility and asked to speak to CT, and on six of those occasions, ACM representatives spoke to CT on the telephone,” the judgment said.
That contact was accompanied by “at least 20 letters to CT demanding repayment” of the Telstra debt, the judgment continued.
During those interactions, ACM staff refused to accept that CT has a disability or to accept nursing staff's explanation of his capabilities.
Legal weasel words in the dock
The judgment also dissects - and criticises - the captialised-for-emphasis language used in repayment demand letters, such as :
“NOTICE OF INTENTION TO COMMENCE LEGAL PROCEEDINGS” and;
“FAILING OUR RECEIPT OF YOUR PAYMENT, WE MAY FORWARD YOUR FILE TO OUR SOLICITORS WITHOUT ANY FURTHER NOTICE.”
Although frequently used by debt collectors, the use of terms like "may" and "intention" in threat letters now appear to have been ruled out of bounds.
Put simply, the judgment means such carefully-chosen language won't automatically get receivables agencies off the hook for using shonky threats.
“The words 'could' and 'may' would reasonably be read in the light of the prominent heading to the pro forma letter, the terms of which strongly suggest that ACM intended shortly to commence legal proceedings against CT,” the judgment said.
“The word 'intention' is a strong and unqualified word. It necessarily casts a particular complexion and character to the body of the letter.”
Witness self service
ACM executives who appeared as witnesses in the case also came in for strong criticism in the judgment.
CEO Paul Brabazon's answers were described as initially “non-responsive and designed to advance ACM’s interests.”
“Mr Brabazon was asked in cross-examination why statements from a carer or nurse would not provide sufficient proof of a debtor’s medical condition,” the judgment said.
“Ultimately, he appeared to accept that persons other than a doctor might be able to give such confirmation. He said that oral statements from nursing staff could be a form of proof, but he then immediately added, self-servingly, why would nurses take the phone over to CT if he was not able to speak.
“Mr Brabazon said that having listened to the tape he got the impression that CT was able to speak reasonably. He was challenged on this by reference to his lack of professional qualifications to assess stroke victims. I found his evidence also to be self-serving,” Justice Griffiths wrote.
The ACCC and ASIC emphasised the importance of their victory.
“The Federal Court has found one of Australia’s largest debt collection firms, ACM Group Ltd, engaged in misleading or deceptive conduct, harassment and coercion, and unconscionable conduct in its dealings with two vulnerable consumers,” a statement from the ACCC said.
“This conduct by ACM was particularly egregious, as it included ongoing harassment of a care facility resident who had difficulty communicating after suffering multiple strokes, as well as a Centrelink recipient who was falsely told their credit would be affected for up to seven years if they failed to pay immediately,” ACCC Commissioner Sarah Court said.
“ACM was found to have made empty threats to litigate against both customers despite knowing they had no means, or only limited means, to repay.”
The ACCC and ASIC had done “extensive work to improve debt collection practices,” Court said.
“Lower-income groups suffer greater stress because of debt collection practices and have limited access to legal support, while creditors are using improper ways to escalate disputes.”