Debt Collection – seeking compensation in relation to consumer credit and lease contracts

Key Message:

When a creditor or debt collector has engaged in undue harassment, or other unlawful behaviour, in relation to a consumer credit contract (loan) or lease you may be able to seek compensation through the Financial Ombudsman Service or Credit and Investments Ombudsman if you have suffered:

  • financial loss (such as out of pocket expenses caused by the debt collector’s conduct);
  • non-financial loss (such as humiliation, distress or inconvenience).

For more information on what behaviour may be considered unlawful, see our factsheet:

Debt Collection: Prohibited Debt Collection – I am being Hassled by a debt collector and contact Consumer Action.

Seeking compensation for unlawful debt collection practices through the Financial Ombudsman Service or the Credit and Investments Ombudsman

Step 1: Send a letter to the creditor or debt collector demanding compensation (an example is available here)

Step 2: Lodge your complaint with the Financial Ombudsman Service or the Credit and Investments Ombudsman (check scheme the creditor or debt collector belongs to)

The Financial Ombudsman Service and Credit and Investments Ombudsman provide free dispute resolution for disputes with credit providers, lessors, and debt collectors dealing with credit contracts and leases.

Before proceeding you should make sure you understand all of your rights.  Details of where you can seek advice are listed below.

You may also wish to consider making an application to the Victorian Civil and Administrative Tribunal (see our factsheet: Debt Collection – Seeking Compensation in VCAT).  Generally it is best to make a complaint to the Financial Ombudsman Service or the Credit and Investments Ombudsman first.  If you are unhappy with the outcome, you can then consider making an application to the Victorian Civil and Administrative Tribunal.

If you have suffered a significant injury, you need to consult a personal injury lawyer urgently.

Sending a letter of demand

Before you make your complaint to the Financial Ombudsman Service or Credit and Investments Ombudsman you are generally required to send a letter of complaint directly to the debt collector.  An example letter is reproduced below.

It is a good idea to send a copy of your complaint to a government regulator (details below) to alert them to any unlawful debt collection practices that you have experienced.

Complaining to the Financial Ombudsman Service or Credit and Investments Ombudsman?

Generally, where there is a consumer credit contract or lease the credit provider, lessor and/or the debt collector must be a member of either the Financial Ombudsman Service or Credit and Investments Ombudsman.

You can check whether the company you are dealing with is a member of the Financial Ombudsman Service or Credit and Investments Ombudsman by checking on their respective websites or calling them.

What compensation can I seek?

The Financial Ombudsman Service

In addition to financial loss,  the Financial Ombudsman Service can provide compensation where there has been:

  • an unusual degree or extent of physical inconvenience, time taken to resolve the situation or interference with the a consumer’s expectation of enjoyment or peace of mind;
  • injury has occurred to a consumer’s feelings or humiliation experienced in relation to a breach of privacy rights.

The maximum amount of compensation for non-financial loss will be $3,000 per claim made in the Dispute.

The Credit and Investments Ombudsman

In addition to financial loss, the Credit and Investments Ombudsman can award compensation for, amongst other things, non-financial loss.  The Credit and Investments Ombudsman has not set any specific limits on when such damages will be awarded.

Past decisions by Courts and the Financial Ombudsman Service indicate that any award of damages is unlikely to be substantial.

Sample letter

For a sample letter click: Seeking compensation in relation to consumer loans and lease debts.

Further Information

For more information on what behaviour may be considered unlawful, see our factsheet: Debt Collection: Prohibited Debt Collection – I am being Hassled by a debt collector and contact Consumer Action.

For an example of a consumer who was awarded $22,950 in compensation after a debt collector repeatedly breached its obligations, see Financial Ombudsman  Financial Ombudsman Service Circular – Issue 23 October 2015  – Seeking compensation for unlawful debt collection practices through the Financial Ombudsman Service or the Credit and Investments Ombudsman

Financial Ombudsman Service
Tel: 1800 367 287
www.fos.org.au

Credit and Investments Ombudsman
Tel: 1800 138 422
www.cio.org.au

National Debt Helpline
Tel: 1800 007 007
www.ndh.org.au

Australian Securities and Investments Commission
Tel: 1300 300 630
www.asic.gov.au

Australian Competition and Consumer Commission
Tel: 1300 302 502
www.accc.gov.au

Consumer Affairs Victoria
Tel: 1300 55 81 81
www.consumer.vic.gov.au

Warning: This action sheet should not be relied upon as legal advice. This information applies only in Victoria and was updated in 6 June 2017.

Image from Joe Gratz.


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