The Importance of Ethics in Debt Collection

An Original Essay by Chris Lagan

Ethics are highly important in debt collection and can bring significant benefits to any business. Ethics are moral principles and standards that administer a behaviour of a person that can arise from actions reflecting from ethical beliefs. Decisions made by debt collectors are inevitably influenced by the corporate culture at their respective workplaces, therefore it is vital that all organisations and employees within the strata community have a sound knowledge of legislation and industry standards, follow The Australian Competition and Consumer Commission (ACCC), and the Australian Securities and Investments Commission (ASIC) and are fair and consistent in their performance.

It is undeniable practicing ethical behaviour through basic knowledge of industry standards and, through following relevant code of conduct, results in better decision making and generates trust. The ACCC and the ASIC are independent authorities that promote and regulate fair trading to protect Australian consumers and creditors by essentially enforcing the Competition and Consumer Act 2010. By frequently reviewing guidelines for businesses about debt collection activities so collectors and debtors understand their rights and obligations, these bodies ensure the law is abided and offences or penalties minimized to aid strong and innovative development of the overall financial system. Actively striving to incorporate the recommendations of these guidelines into daily working practice through interactions with agents and assignees, is eminently crucial in enhancing morality, demonstrating respect, and avoiding misconduct which could potentially have detrimental impacts on a firm. A hypothetical example of how ethics is important in strata issue management relates to when a debt collector speaks to an individual on behalf of an account holder regarding the account details, and the collector provides sensitive information relating to the account holder’s debt i.e. how much they owe, where they reside, or various other contact details on file to which this person could potentially use this information against the account holder themselves or the company the debt collector is employed at for personal gain. Other consequences of this action include the probability of the account holder lodging a claim against the collector and the respective organisation, which can lead to penalties for breaches from the ACCC and ASIC in relation to harassment and coercion. The ACCC and ASIC therefore relate to ethics and moral judgement as it is imperative when communicating with a debtor, that one follows the clearly set- out guidelines to ensure efficiency in collection activity while protecting the safety and privacy of clients. In addition, debt collectors have an obligation to follow legislative guidelines outlined by the Strata Schemes Management Act 2015 which was developed with a strong focus of unpaid contributions and interest in a strata scheme.

Debt collectors working in strata dealing with owners/ debtors need to be fair and consistent as every debtor owes money and if they don’t pay then after all the reminders and follow-ups you proceed with legal action. Collectors can always defuse the debtor’s attempt to avoid legal action or payment negotiations. You must not show favouritism or discrimination. If you make a promise to someone then this should be followed through.

Confidentially plays a vital part in debt collection as their personal information should always be treated with respect. Sensitive information must not be disclosed unless given consent by the person. For example, if a friend or relative wanted to call on behalf of the owner/debtor they can however you don’t give out any information that can potentially leave a bad reputation on the company you work for or be fined.

There was a case titled “Busybody’ insult ends in $120k payout” A Committee member for Watermark’s strata repeatedly told a neighbour at the Manly property to make sure her mailbox is locked as all mail should be kept confidential as there was a previous incident that thieves broke into mailboxes, the neighbour continued to ignore the requests and then eventually replied saying he was harassing her and you’re a busybody. The committee member then took this to court as he felt he was being defamed which then resulted in consequences and the neighbour paying out the committee member $120k. The other thing to consider here is that the strata company Watermark’s Strata was also affected by this in addition it has now left a bad reputation for the company.

In conclusion it is important to recognise what ethics is and the moral principles that shape the understanding of guidelines that must be followed to avoid fines, legal problems that could result in job termination, bankruptcy, bad reputation, and other long-term impacts. Ethics is not something you can teach someone it’s somewhat in our day-to-day routine and how we are brought up to work and deal with different situations and knowing what is right and wrong. At times there can be difficult situations but it’s vigorous to follow guidelines in our workplace because it keeps us healthy, and we can perform our jobs/tasks at hand effectively. In not doing so can result in jeopardising your career and the company you work for.

Ethical behaviour and corporate social responsibility can also carryout significant benefits to a business with respect and being socially responsible through consequences and being accountable for its actions. It’s imperative for companies to engage in corporate social responsibility because it means that the company can operate in ways that boost society and the environment.