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Recovering costs for debt collection services

Recovering costs for debt collection services

Fees and costs, including legal costs and costs for third party debt collection services can only be collected from a debtor if there is an agreement between the creditor and debtor providing for those costs to be payable to the creditor. Attempting to recover costs in the absence of a clause in the relevant agreement can be misleading deceptive and conduct in contravention of section 18 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)), section 154 of the National Credit Code (Schedule 1 of the National Consumer Credit Protection Act 2009 (Cth)) as well as Section 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (“the ASIC Act”).

This issue was raised in Australian Competition and Consumer Commission v Sampson [2011] FCA 1165 in which a solicitor was found liable for, amongst other things, asserting that debtors were liable for legal costs of $30 on top of the debt for unpaid video rental fees, when sending letters of demand and notices to customers of a video rental company. There was no entitlement for the video rental company to recover pre-litigation legal costs and so the Court found the statements made by the solicitor were misleading and deceptive.
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