An organisation representing financial mentors warns unethical debt collectors are harassing people to pay-off loans at their workplaces, homes and on social media.
FinCap charity has released its annual Voices report after collecting data from more than 700 financial mentors.
Its chief executive Fleur Howard said some debt collectors are deliberately panicking debtors and stricter rules are needed.
“Financial mentors tell us they are working with people who are being harassed and coerced by debt collectors at work, at home, and on social media. This can endanger people’s employment and embarrass them in front of their communities,” she said.
“These tactics force people to agree to repay debts they may not be legally responsible for, and repayment plans they can’t afford. This can send people into a spiral of missed repayments, and see small initial debts balloon in size.”
The report shows half of those seeking help from a financial mentor are in work, while one in ten have a mortgage.
Financial mentors have seen an 88 percent increase in waged or salaried clients earning over $1000 per week since 2021.
The report states that many households have taken on debt to pay bills and keep food on the table, and a large burden of accumulated household debt has been building, much of which has become unmanageable.
It said some debt collectors were also using coercion or illegitimate threats of legal action and turning up at people’s workpaces, homes and sending excessive automated texts and emails.
“This isn’t about getting people out of debts that they legitimately owe,” Howard said.
“Some debts arise that should never have been issued under today’s responsible lending rules. Sometimes, they are debts owed by a relative, which people are pressured into taking responsibility for, or there is actually no legitimate debt at all.”
Howard said many households were struggling with the burden of accumulated and unmanageable debt.
“There are debt collection agencies who act responsibly, but the lax legal framework creates a wild west situation, where some unscrupulous debt collectors act unethically. “
The Fair Trading Act governs all private debt collection and in May, Commerce and Consumer Affairs Minister Scott Simpson said he would review the Act later this year with a responsibility to “safeguard the interests of consumers and ensure that their rights are fairly upheld”.
Howard said that planned review, alongisde the Financial Services Reforms Bills currently before Parliament were important opportunities to fix the law around debt collection.
“Debt collection reform will enable people to repay money they legitimately owe, without being subject to harassment and bullying,” she said.
