Here is the story. You have a debt you can't repay. The lender tires of trying to recover it and sells your bad debt to a collection agency. They now pressure you, then offer you a heavily reduced amount to encourage you to finalise the account, which you do. Years later you receive a call to say you still have an outstanding debt that needs to be paid... what do you do?
This has recently happened to a family friend of mine, so based on their experience, please consider the following four tips to help you work through the issue.
1. Do not agree to owing the debt
In Australia you may have a defence against a debt if:
- a long period of time has passed since you last made a payment or confirmed the debt in writing
- no court action has been taken to recover the debt in the meantime.
Generally, you can raise this as a defence if 6 years have passed since you last made a payment or confirmed the debt, and there is no court judgment against you. If this is the case, recovery of the debt through the courts is said to be 'statute-barred' and the courts will not enforce the debt. If there is no court judgment against you and you make another payment, the clock will start again and generally you will not be able to rely on this defence anymore.
If you think a debt collector is contacting you about a debt that is 'statute-barred', you should get legal advice before you make any payment or confirm the debt in writing.
2. Obtain a copy of your Credit Report
In Australia, you can obtain a free copy of your personal credit report by completing an online form and providing some identification through Veda Australia. You must check your report and;
- look for what the original lender listed on your report. You can only have one listing per debt, so if there is a default noted, the collection agency can't list another despite their threats.
- see if anyone has accessed your report without your consent. My friend had his file accessed by the collection agency the month before they began calling him, and he is certain he gave no written or verbal authority. He is pursueing this currently now.
3. Keep all your paperwork
My friend was certain he received a letter confirming the final payment years ago, but on searching his archives, he was unable to locate it. This is an important lesson. You should always keep all correspondence (no matter how old) that confirms a debt has been repaid. Without being able to prove payment by receipts, bank or credit card statements you can still be liable to pay the debt.
4. Get legal advice
This depends greatly on your individual situation, but given there are free legal advice centres throughout Australia, it is certainly worth discussing. Many people feel pressured by collection agencies and do not understand their rights. There are strict laws governing the conduct of these agencies, such as unreasonable harassment, which legal advisors will be able to determine for you.
I certainly don't wish this situation on anyone, but if it does happen to you, I hope these tips point you in the right direction to fairly resolve it.