Using a debt collection dispute letter
If you have received a letter of demand from a debt collector for a debt that isn’t yours or is for more than you owe, you should take steps to challenge it. One of the best ways to do so is with a debt collection dispute letter - a formal response outlining why you are disputing the amount claimed.
While there are rules and regulations governing debt collection in Australia, you should not ignore a demand for payment because you believe it is inaccurate. It is important to respond promptly to get it sorted as soon as possible and avoid potential legal action.
How to dispute debt collection
You may feel panicked by the demand but, even if you have dealt with the business before, don’t rush to pay it. Ensure that the debt is legitimate, and the amount is correct. This can help protect you from scams or prevent you from paying something you shouldn't. If you don’t believe the debt is yours, or the amount is different from what you owe, you need to know how to respond to a debt collector.
While there are rules and regulations governing debt collection in Australia, you should not ignore a demand for payment because you believe it is inaccurate. It is important to respond promptly to get it sorted as soon as possible and avoid potential legal action.
Get the full details in writing
Ask the debt collection agency for a full breakdown of the debt they are demanding be paid. This includes the original amount, the date the debt was incurred, any fees or interest incurred, and information about the original creditor. This will help you verify the debt or identify any potential errors.
It is best that all requests for information are put in writing so that you have a record of what was said and when. If you do need to make a phone call, make sure you take notes.
Contact the original supplier
If the amounts don’t tally or you believe the debt has been settled already, it is best to contact the original creditor or supplier directly, rather than the debt collection agency.
They should be able to provide you with more information about the debt. Ask for a copy of any contract and a detailed account of any fees and charges that may have been added to the debt. If the creditor agrees that the amount is incorrect and that you only need to pay a lesser amount, or that it was an error on their part and the debt has been paid in full, ensure you get that in writing.
Write a debt dispute letter
If you have disputed the debt or the amount requested and the creditor is still saying you owe the money, it is best to put your response in writing. Outline the reasons why you believe the demand is incorrect in a debt dispute letter to the collection agency.
Be clear, concise and attach copies of any correspondence or paperwork, such as bank receipts or invoice payments, to show that it has been paid. If it’s for a service you clearly didn’t use because you were away, provide any evidence to that effect.
Seek external dispute assistance
If you receive further demands after you have sent your dispute letter, don’t panic. There is outside help available and it doesn’t need to be costly. Consider using an external dispute resolution (EDR) scheme. These independent organisations help resolve disputes between consumers and businesses, and their services are usually free. The Australian Competition and Consumer Commission (ACCC) has a list of EDR schemes you can contact.
What happens if you ignore debt collectors?
Not responding to debt collectors might seem like the easiest option, especially if you're under financial stress, but it can lead to further complications, including:
Continued contact
If you ignore debt collectors, this doesn't mean they will go away. In fact, they will likely increase their efforts to contact you. This can include continuous letters, phone calls, emails, or even text messages. Keep in mind that there are laws in place in some jurisdictions about when and how often a debt collector can contact you.
Legal action
If debt collectors don’t get payment through regular contact, they may take legal action. This could result in them taking you to court to obtain a judgement for the debt. If the court rules in their favour, they could be granted permission to recover the debt in several ways, such as garnishing your wages, placing a lien on your property, or seizing your assets. This can lead to additional costs, such as court fees and legal expenses.
Impact on your credit rating
One of the significant consequences of ignoring debt collectors is the negative impact it can have on your credit rating. Unpaid debts and collection accounts can show up on your credit report and lower your credit score. If a judgment is obtained against you in court, this can also appear on your credit report and further damage your credit rating.
We know this can be a stressful time. If you feel like your complaints are not being heard, get in touch with us and we’ll help you handle it.
