The debt collection industry in Australia is a mature, highly regulated market made up of small, medium and large agencies, each of which concentrate on certain market segments.
Some agencies specialise in commercial debt (B2B) and work on a commission basis and others specialise in collecting consumer debt (B2C), also on a commission, whilst others concentrate on purchasing large portfolios of consumer debt from organisations such as finance companies, telco’s and utilities.
Consumer versus Commercial Debt Recovery
The recovery of consumer debt is quite different to the recovery of commercial debt, and so too is the expertise, tools and technology required to succeed in each market. On top of that, the legal and compliance framework governing consumer and commercial collections (whilst drawn from the same basic principles) require specialist understanding and constant monitoring to ensure compliance with the complex regulatory framework.
Shield Mercantile is a member of the AMPAC Group of Companies and works almost exclusively in the consumer debt collection market. Its clients are large lending institutions such as banks, auto financiers and credit unions.
AMPAC specialises in commercial debt recovery which often includes complicated disputes involving legal action. AMPAC’s client base consists of large and small organisations across a very broad range of industries such as construction, education, food and beverage, professional services, strata managers and government.
The services provided by Shield and AMPAC are similar and include issuing demands, locating debtors, assessing their capacity to pay, establishing and managing payment arrangements as well as repossession and asset sales, however each requires a unique set of skills to deliver the very best outcomes.
Both businesses operate in a strictly regulated environment, with many protections in place for businesses and individuals to prevent illegal debt collection activity. In the case of Shield Mercantile, it is subject to additional regulatory oversight because it works almost exclusively on consumer debt portfolios.
Rules, Regulations and Compliance
The rules and regulations that control the debt collection industry are complex ranging from State and Federal Acts, including the Federal Privacy Legislation. Various Acts also provide specific protection to individuals, as distinct from businesses.
In most states of Australia, collection agencies must be licensed, and in certain states, each employee must also hold an individual license. In New South Wales, these licenses are issued by the Police with conditions of the license enforced by the Security Licensing and Enforcement Directorate (SLED).
The Australian Securities and Investment Commission (ASIC), in conjunction with The Australian Competition and Consumer Commission (ACCC) publish a set of Guidelines known as the ACCC & ASIC Debt Collection Guideline for Collectors and Creditors. This is a comprehensive document which establishes guidelines based on best practice and is designed to protect businesses and individuals from unethical and sometimes illegal debt collection practices.
One of the many conditions of holding a Commercial Agent’s License relates to the handling of money. All money collected by an agency, on behalf of a client, is required to be banked into a trust account and kept separate from other funds used to run the collection agency business. In most cases, the agency will remit collected monies to its clients at the end of each month, together with a remittance advice or reconciliation detailing each transaction.
Technology, Privacy and Data Security in Debt Collection
Technology is an important part of everyday life, both in business and personally. The debt collection industry is no different and has introduced many new technologies designed to improve customer service, efficiency, results and compliance.
Many debt collection agencies now not only provide online access for their clients, but also to their customers that have been referred to the agency because of an unpaid account. Nowadays, making payments, setting up payment arrangements, communicating with the agency and requesting a call-back can all be done from the convenience of a smart phone, tablet or personal computer, and at a time suitable to the customer.
Because most payments and financial transactions between the agency and its customers occur electronically, the security of payment information is critical. So too is the personal information contained in the agency’s database. Debt collection agencies receive personal information from their clients to allow collection of the debt that has been referred to them and thankfully, legislation has evolved over the years to protect this information.
Legislation around privacy and data security, not just in Australia but all around the world has been introduced to allow individuals and businesses to conveniently and confidently transact using these new tools. This legislation captures all businesses including collection agencies and financial institutions and imposes heavy penalties in the event of a breach.
Most collection agencies recovering consumer debt on behalf of financial institutions, major corporations and government departments are subject to a comprehensive, annual audit of their systems and processes to ensure they fully comply with all privacy and data security legislation.
To further strengthen data security and privacy compliance, neither Shield nor AMPAC allow any of their data to be sent off-shore and both organisations are subject to regular penetration testing by a certified, external organisation to provide the highest level of comfort to clients and their customers.
If you would like to know more about Shield Mercantile, call us on (02) 9687 6111 or click here to ask us a question