This is why we have debt collection guidelines

This is why we have debt collection guidelines

A few landmark cases in Australian courts have highlighted the importance of following debt collection guidelines when recovering overdue cash from debtors. Thanks to high profile cases like these, debt collection practices have improved. They serve as good reminders of what not to do.

In Australia, the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investment Commission (ASIC) enforce Commonwealth consumer protection laws, including laws pertaining to debt collection. Their document, Debt collection guidelines for collectors and creditors outlines the responsibilities and expectations of creditors and debt collectors.

Do debt collection guidelines apply to you?

You should follow the ACCC and ASIC debt collection guidelines if you are:

  • a creditor directly involved in debt collection activities in-house, or a creditor who uses an agent for collection. (Creditors generally retain liability for their agent’s conduct.)
  • a debt collector (including a debt collection agency, debt buy-out service, solicitor and other).

While the debt collection guidelines largely relate to collecting debts from individual debtors, many of the laws and principles in the guidelines are relevant to the collection of small business debts in particular.

Debt collection guidelines for making contact with a debtor

Privacy laws prevail here and creditors and debt collectors have obligations to protect the privacy of debtors. In trying to contact the debtor, you are not allowed to divulge confidential information about the debt or the debt recovery process to anyone other than the debtor (even to the debtor’s spouse, partner, family, workplace etc.) Avoid public shaming of debtors on social media accounts or any channel that is shared with other parties.

Creditors and debt collectors must not misrepresent their identity to the debtor in any way, for example, by implying they are, or work for a debt collection agency.

Case in point #1

In ACCC vs Excite Mobile Pty Ltd [2013] FCA 350:

In 2013, South Australian mobile phone provider, Excite Mobile Pty Ltd was fined for engaging in false, misleading and unconscionable conduct, and using undue coercion in relation to the selling and obtaining payment for mobile phone services (ACCC, Media Release, 29 November 2013).

The company created a fake complaints handling organisation to deceive debtors into believing their disputes about liability were being assessed by an independent body when neither that body nor those activities existed. The company then contacted debtors under the false pretense of a fictitious debt collection agency to induce debtors to pay the alleged debts.

The court found this conduct to be unconscionable and that the company used undue coercion in its dealings with debtors. Several of the company’s employees were also found to have been knowingly concerned and personally liable for the contravening conduct. (ACCC, Debt collection guidelines for collectors and creditors, 2014)

The penalty: Excite Mobile Pty Ltd was ordered to pay penalties totalling $455,000. Excite Mobile’s directors, Mr Obie Brown and Mr David Samuel were also personally fined and were disqualified from managing a corporation for three years and two and a half years respectively.

Debt collection guidelines for conduct towards the debtor or their representatives

Debtors are entitled to respect and courtesy, and creditors and/or debt collectors have been penalised for subjecting debtors to misleading, humiliating or intimidating conduct. 

Included in ACCC and ASIC debt collection guidelines are the following list of things creditors and debt collectors must not do:

  • use abusive, offensive, obscene or discriminatory language
  • mislead a debtor about the nature or extent of a debt, or the consequences of non-payment.
  • embarrass or shame a debtor—for example, by sending open correspondence to a shared post-box, or public online forum    

If a debtor is behaving inappropriately, creditors are advised to maintain professional conduct and refer the matter to appropriately trained management. Violence or extreme conduct from the debtor should be reported to police.

Case in point #2

In ASIC v Accounts Control Management Services Pty Ltd [2012] FCA 116:

In 2012, the Federal Court found that debt collection companies, ACM Group Limited and its predecessor Accounts Control Management Services Pty Ltd, harassed and coerced debtors and engaged in misleading and deceptive conduct when recovering money.

The court found that the collection officers were instructed via the company’s (then) policy manual to threaten debtors with litigation even though less than 0.5% of debtor accounts were sent to the legal department.

The company represented to a debtor that it was commencing proceedings to bankrupt the debtor, which would involve his house being repossessed, when this was not true. The company also represented to a debtor that it would cause Sheriff’s officers to attend the debtor’s home to serve documents when this was not possible.

The court found that the operators were told to make references to legal proceedings and lawyers as a means of achieving debt recoveries. (ACCC, Debt collection guidelines for collectors and creditors, 2014).

In its 2015 report, Research into the  Australian Debt Collection Industry, the ACCC noted that increased regulatory insight had led to an improvement in debt collection behaviour. It notes that despite variations in state and territory licensing regimes, the key obligations of debt collectors when dealing with consumers are made clear by the ACCC/ASIC Debt Collection Guideline

Debt collection guidelines for collectors and creditors  is available in full from the ACCC website.

Demand letter template: The correct way to write a letter of demand

Demand letter template: The correct way to write a letter of demand

A demand letter can be a powerful addition to your collection strategy. Think of it as being more formal than your payment reminders, less formal than a legal notice. An effective demand letter, also known as a letter of demand, dunning letter or debt collection letter, helps your customer to understand the consequences of paying late. It provides details of the debt you’re owed and your payment expectations. In this post, we break down the anatomy of a demand letter so that you can create a compelling piece of communication that expedites cash recovery.

When do I need a demand letter?

A demand letter typically follows a series of failed attempts by the creditor to collect the money owed to them by their debtor. You can generate your own demand letter or you can pay a debt collection agency to send one on your behalf.

Imagine you’re the gift wholesaler, ABC Wholesalers. You’ve supplied your retail customer, XYZ Shopfront with $10,000 worth of goods on credit. The due date was 35 days ago, and since then you’ve sent a few emails to remind them to pay. Despite their promise to pay, the money has not arrived. You’d like to retain XYZ Shopfront as a customer but you can no longer afford to carry this debt. You decide it’s time to take more serious action and send a demand letter.

Send a demand letter when:

  • You’ve sent payment reminders and made phone calls without getting a response from your customer.
  • Your customer promised to pay but the money never arrived.
  • You want to remind your customer of their payment obligations under your trade credit agreement.
  • You want to give your customer another opportunity to pay their invoice before you commence legal action.

Download our free reminder templates and AR resources

Advice from a debt recovery specialist

At ezyCollect, we partner with debt collection agencies who can help our users to send a demand letter easily. Our partners have a track record of using positive collection techniques to help businesses recover ageing commercial debts. We asked Eddie Smith, debt recovery specialist from Australian Recoveries & Mercantile Agents, for his advice on the best way to write and send a demand letter.

“A demand letter notifies a customer in writing that they are overdue in paying an account, and stipulates the sender’s expectation of payment. The letter of demand can be sent on the creditor’s letterhead or if it arrives on a third party letterhead, debtors tend to pay attention and are typically more influenced to pay,” advises Eddie.

Before you send a demand letter

Eddie’s advice is to make the effort to find out the root cause of non-payment before you send a demand letter.

  • Phone your customer and work on resolving any disputed invoices.
  • Send payment reminders (usually via email) with copies of the overdue invoices attached. Give your customer reasonable time to respond.
  • Consider allowing your debtor to pay off their debt in instalments if they are experiencing cashflow problems. (Pay by Instalments is a standard payment offer in ezyCollect’s online payment solution.)

The right time to send a demand letter

“The right time to send a demand letter is when your other internal efforts to recover the debt have been unsuccessful,” advises Eddie. “Once you’ve tried to reach your debtor with email or SMS reminders and phone calls, without success, sending a demand letter is a sensible next step.”

In Eddie’s experience, businesses used to reach the 90-day mark (the invoice is overdue by 90 days) before sending a demand letter, but the trend is changing.

“It’s more common that businesses want to send a demand letter within 60 days, as they understand it’s about getting paid as quickly as possible. They move through their internal efforts more efficiently, then outsource if they need to.”

Still, some businesses sit on overdue debts for far too long. “Small businesses can get personally attached to the debt and sincerely believe their customer will eventually pay—the ‘she’ll be right’ attitude. Bigger businesses don’t do that. For them, it’s about getting paid,” says Eddie.

Even the professionals find it harder to recover money as overdue days increase. “Your debtor’s financial situation can change over time, they might cease trading, and their contact details can change,” says Eddie. In most Australian states, invoices that are more than six years old are considered Statute Barred i.e. they are no longer legally enforceable due to the period of time that has elapsed since the debt was first issued.

Demand letter must-haves:

Eddie advises creditors to write a succinct letter, keep a copy of it, and send it via registered mail for proof of delivery.


Lay out your demand letter on your letterhead or if you have engaged a debt collection or legal firm, they will send the letter of demand on their letterhead. A letterhead contains relevant contact details, including an address and phone number for the business seeking the collection.


It’s important that your letter is dated as evidence of when you tried to contact your debtor.

Debtor’s correct address

Make efforts to find the current listed business address for your debtor. Debt collection firms use a number of data sources to locate debtors.


After your polite salutation, make it clear this is a letter of demand by stating ‘Letter of Demand from <company name> ’.


Details of the debt

Clearly state the details of the debt owing:

  • Total amount owing
  • Invoice number/s
  • Due date/s
  • Details of the goods or services provided
  • Any late penalties that have accrued (if documented in your customer’s signed contract)
  • The name of the person who signed the order with your business.

For your debtor’s reference, you can attach copies of invoices and your signed contract that includes payment terms and conditions.

Previous attempts to contact the debtor

Remind your debtor of your previous attempts to contact them about the debt. You can refer to the dates you sent emails or left a phone message.

State your expectation of payment

Outline your payment expectations within your desired time period. For example: ‘Please be advised that I expect full recovery for the debt of $10,000 within seven days of the date of this letter.’

Include payment methods

Advise your debtor of your accepted payment methods e.g. bank account for deposits, details to send a cheque, and/or credit card acceptance.


Honestly advise your debtor of your next intended action if they don’t complete the payment. As a creditor, you are not allowed to misrepresent action that you do not intend to take i.e. do not suggest legal action will follow if this is not your intention. However, you can ‘reserve the right to take legal action without further notice to you.’

Remind your debtor of any court or recovery costs they will be liable for should you commence further action. Note that these terms should have been included in the most recent contract your customer signed as part of their trade agreement with you.

After a polite closing, e.g. ‘Yours sincerely,’ include your signature, name and title in your sign-off.

A note on tone

Being firm but reasonable in tone is important, says Eddie. When Eddie communicates on behalf of creditors, he understands the debt collection letter is an opportunity to save the customer relationship and resolve the issue in a positive way. “We aim to work out a solution for our client that maps a way forward for them and their debtor.”

To sum up:

  • Add a demand letter to your collection sequence. Send it when you need to take more serious action to recover unpaid invoices.
  • The demand letter clearly articulates your payment expectations.
  • Include all relevant invoice details and attach invoice copies.
  • Document your previous attempts to collect.
  • Remind your customers of the terms and conditions of your trade agreement.
  • Do not misrepresent your intended action.
  • The demand letter is an opportunity to recover the money in full or part, and save the customer relationship.

ezyCollect users can include a demand letter in their collections workflow and activate it with a single click within the app. Our debt collection partners then receive the history of your collection attempts and will send a demand letter on your behalf. A fee per letter applies.

To see our collections workflow in action, request a one-on-one demo:

All work and no pay makes wholesale a difficult business

All work and no pay makes wholesale a difficult business

Businesses are getting better at paying on time, but wholesale distributors still suffer from the late paying habits of their retail customers. According to illion’s recent Late Payments Analysis (September Quarter 2019), the retail sector is the second slowest to pay their bills, paying bills an average of 12 days late. For the wholesale supplier, all work and no pay still rings true.

As a result, sluggish cashflow can be a killer for wholesale distributors. Not surprisingly, the entire supply chain suffers. After all, wholesalers and distributors are a crucial link between manufacturers and retailers.

Approximately 60,000 wholesale businesses in Australia employ nearly half a million people (IBISWorld). Wages alone—an estimated $35 billion—are a huge responsibility. Pressure on profit margins, increasing costs of fuel, and a downturn in economy mean that cashflow is a daily concern.

Download ezyCollect’s free toolkit of accounts receivable resources

It goes without saying that sales are important for cashflow. Collecting payment is equally important. After all, without cash on hand, a business will struggle to pay its bills, provide quality products to customers and invest in growth. Businesses that are determined to get paid on time are leveraging technology to transform their accounts receivable process. Here’s how wholesale distributors use ezyCollect to get paid faster:

Automate the manual tasks

Anthony Bedford is the Financial Controller at Feral Brewing Company and checks cashflow daily. When 40-45 percent of invoices were overdue each month, he identified accounts receivable as a key opportunity to improve cashflow. Anthony considered hiring a credit controller to reduce collection times, but decided that manually following up a large amount of invoices wasn’t going to be effective. “With a large customer base, some with relatively small dollar amounts per invoice, an IT solution was the most cost effective option,” explains Anthony.

Now, automated payment reminders from ezyCollect ensure consistent and regular follow-up of the craft brewery’s hundreds of debtors.

The result: Feral Brewing halved its overdue accounts within the first few months.

Operating capital has improved significantly and this has assisted the cashflows to a more stable level. For a business that checks its cashflow daily, being able to forecast with confidence is another tick in the box.

Ditch generic reminders

“Generic reminders get ignored”, advises Catherine Lander-Graham. Catherine, a credit controller in a mid-sized distribution company, understands the difficulty of managing a steady stream of late payers. Although she could generate a statement from her ERP to her debtors, very few debtors responded with a payment: “The generic nature of the statement meant it was easily ignored.”

Now she customises automated reminders that reach every debtor. “I was able to add the personal touch to every email by using merge fields that automatically added in each debtor’s name, total overdue and even attached copies of invoices and statements. I was communicating with hundreds of customers within an hour, virtually hands-free.”

The result: Within two months, the distribution company cut its overdue invoices by 40 percent, and Catherine’s workload decreased dramatically.

“The reminders were doing their job touching base with so many debtors, with many customers emailing back and apologising that they were so overdue. They even thanked me for the reminders. With the extra time, I was able to get through all the daily credit requests and concentrate on other value adding work.”

Improve debtor visibility

Linda Attenborough is the financial controller at lighting and fan wholesale distributor, Martec Pty Ltd. Linda used to find it difficult to maintain good visibility of overdue debtors. She found herself trying to piece together the complete picture from multiple sources of information. Some accounts aged more than 120 days because the accounts team didn’t have high visibility on ageing invoice data. Nor did they have the time to consistently remind customers to pay.

Now, team Martec use ezyCollect’s system to drive their debtor management process. ezyCollect identifies ageing debtors before they have the chance to become delinquent, so that Linda’s team can follow up proactively. The team has an up-to-date log of all debtor communications in one place and can take decisive action with confidence.

The ezyCollect system consistently issues payment reminders to overdue debtors and automatically attaches a copy of overdue invoices. “It helps debtors, too,” says Linda, who can now be sure her debtors have received the invoice and all the payment information on hand.

The result: Automated reminders save eight hours a day.
From a starting point of 27 percent of accounts overdue, only five percent of MARTEC’s accounts receivables are now overdue.

The keys to better cashflow and productivity

Wholesale distributors, regardless of their product line, can benefit from efficiencies in their invoice-to-cash process. Getting accounts paid on time (with less resources from within the business) brings cashflow and productivity gains.

  • Remind, remind, remind customers to pay. Automate a workflow of polite payment reminders that consistently get your overdue invoices noticed.
  • Manage debtors easily by consolidating all your information into one central source. This becomes your debtor CRM – a single source of truth for the accounts team.
  • Track every invoice to payment. The hundreds of low-value invoices need your attention, too.
  • Collect money securely online. An online payments facility makes it even easier for debtors to settle their account.

For better cashflow in your wholesale distribution business, try ezyCollect’s complete solution for accounts receivable management.