On Friday November 30 the Minister of Home Affairs the Hon. Walter Roban JP MP passed a Bill in the House of Assembly which will prohibit unfair debt collection practices and provide a level playing field for both creditors and debtors.
The Bill, entitled the “Debt Collection Act 2018" represents the first tranche of proposals to address the Government’s Throne Speech 2017 commitment to “introduce regulations for debt collection agencies; regulate payday lenders who lend money at extraordinary interest rates; and bring banking, insurance and other financial service conduct under the umbrella of an updated Consumer Protection Act.” Further legislation will be proposed to address consumer services provided by the banking, insurance and other financial service industries after consultation with the public and private sector stakeholder groups as indicated in the 2018 Throne Speech.
The Debt Collection Act 2018 provides five important components:
· Establishing a Government regulatory licensing Authority for the debt collection industry,
· Prohibiting unfair debt collection practices,
· Requiring financial transparency of contractual penalty fees and limits interest rates, administration fees and commission fees,
· Establishing complaint procedures, investigation and inspection powers,
· Creating offences and right of appeal to the Debt Collection Tribunal.
"Oft-times we are our own worst enemy when accumulating debt that we find difficult to repay," said Minister Roban. "However, there are times when we incur debt through no fault of our own. One example is when a person gets sick, is not insured and has exorbitant medical costs. If he or she cannot work because of his or her illness, he or she does not have the money to pay the costs. Inevitably this person’s debt may end up in collection and winds up incurring even greater costs.
"There have also been cases where persons have been charged for costs that they did not incur. All too often, a creditor may not have a contract or proper accounting to support the claim of debt. The purported debtor may spend an inordinate amount of time and, sometimes, money to obtain an accounting of the debt and prove that he or she did not owe the money. In addition, debtors may also be subject to harassment and embarrassment until it is proven that they do not owe any or only a portion of the alleged debt."
Government oversight will be accomplished through a comprehensive licensing regulatory framework for those entities engaging in Debt Collection under the newly-created Debt Collection Licensing Authority. The Licensing Authority will be constituted from Officers within Consumer Affairs. The regulatory functions of the Authority include but are not limited to oversight, licensing, education, investigations and enforcement.
Going forward, no debt collector can operate without a licence issued by the Licensing Authority. The Authority, upon receipt of an application, supporting documents and payment of fee, can grant, renew and refuse a licence. Licensing will be for a period of up to two years. An application for the renewal of a licence is to be submitted before or on 31st March in the year in which the licence is to be renewed. There is a provision of a 90 day grace period from commencement of the Act to obtain a license for those who are currently engaging in the debt collection business.
All creditors, including those creditors who conduct their own debt collection and are exempted from the licensing requirements under Part 3 of the Act, will be subject to Part 4 of the Act on “Unfair Debt Collection Practices”. This is an area that addresses many problems including: requiring that proper documentation on the amount of the debt is provided to debtors, requiring that debtors are notified of contract obligations in terms of commission fees and administration fees, and preventing creditors from providing false or misleading statements to debtors in order to collect debt. The Bill provides debtors with the right to see and validate the debt paperwork sent by the creditor to the collector. Debtors have 30 days to dispute the debt or any portion of it.
The Act includes oversight and accountability of Credit Reporting Agencies through regulations. This will address the harm that debtors have experienced when seeking jobs, credit and business opportunities. The regulations will speak to the removal of debtors from an agency's database once the debt has been satisfied.
Financial transparency and proper accounting procedures are also addressed within the Act. For example, debt collectors will be required to have trust accounts and proper accounting practices. Debtors will now have receipts that contain a complete accounting of all credits and debits to that debtor's trust account for ease of repayment tracking.
Fees and commissions charged to the debtor will now be legislated. For example, the Act allows debt collection agencies to charge a commission fee to the maximum of 20% of the original amount of the debt payable only once.
"By empowering the debtor with legislative rights to challenge the debt’s accuracy and their right to be treated fairly during the debt recovery process, one must also provide enforcement powers to ensure compliance," said Minister Roban. "The Act provides the Authority the powers to receive and investigate complaints; provides for offences relating to not cooperating with investigations of complaints; the right of redress; and the right of the debt collector to appeal to the Debt Collection Tribunal. To be clear, this Act does not absolve the debtor from his obligation to repay his debt."
The Debt Collection Act 2018 encompasses the Government’s firm commitment to protect the rights of consumers by enacting legislation which contains basic obligations owed by those who provide credit and debt collection services.