The Enforcement of Assigned Debts
The assignment of credit contracts in default is quite common in the area of recoveries. Banks often assign defaulting credit card accounts and personal loan accounts to debt collectors in an effort to minimise their costs of recovery.
Section 199 of the Property Law Act 1974 (Qld) allows for the assignment of debt at law but stipulates that it must be absolute, and written notice must be given to the debtor. It is not, however, a requirement for the debtor to consent to this assignment.
Once a debt is assigned, all rights and responsibilities of the original credit provider (the assignor) vests in the new owner (the assignee). This means that the assignee can now collect on the debt as if they were the original credit provider, including charging interest pursuant to the contract and commencing legal proceedings to recover it.
The Code sets standards for the provision and regulation of credit lending in Australia, including aspects such as hardship and unfair contracts which can affect assignees retrospectively. For example, if the debtor has an offsetting claim or alleges that the loan was improperly obtained, the assignee will be responsible for addressing these concerns and can even be made to reduce or write off the debt and in some cases, compensate the debtor for the actions of the assignor. This retrospective action allowed by the Code is imperative in rectifying unfair contracts entered into by parties who often have an unbalanced negotiating position. Further, the ongoing protection of vulnerable consumers (even if the original financier has on sold it to a debt collector), is in the public interest.
The assignment of debt is covered extensively in the National Credit Code, located in Schedule 1 of the National Consumer Credit Protection Act 2009 (Cth) (the Code) where it stipulates the responsibilities of any credit lenders.
The collection of assigned debts can initially lead to confusion on the part of the debtor because although there is a requirement for written notice of the assignment to be provided, this only extends to providing a notice to the last known address (or last provided address) of the debtor.
Legal recovery can be problematic as many debtors are not familiar with the concept of debt assignment, and often have not read their credit contract in detail. An assignee who commences a legal proceeding to recover an outstanding balance can be met with many obstacles.
In the case of Clark v Gallop Reserve Pty Ltd  QCA 146, the appellant sought the Court’s review of the trial court decision where the Westpac Bank Corporation (“Westpac”) Deed of Assignment had been found to be a valid assignment document, despite the judgment debt not being specifically included in the description of the debt outstanding to Westpac. Philip McMurdo JA stated that in this instance the wording ‘Westpac assigns to the Transferee all of Westpac’s full, absolute and entire legal and beneficial interest, right and title in and to the Westpac Debt, the Westpac Finance Documents and the Westpac Guarantees’ was sufficient to include the judgment obtained by Westpac prior to assignment and the valid assignment of debt enabled Gallop Reserve Pty Ltd (Gallop) to enforce the judgment debt in relation to monies owing pursuant to a guarantee.
Accordingly, if a debt has been validly assigned (absolutely in writing and the notice is provided to the debtor’s last known place of residence) and there is no offsetting claim available to the debtor (such as a binding settlement agreement reducing the balance owed), the assignee is entitled to take any legal steps necessary to recover the outstanding monies. These enforcement options include:
- 1. commencing proceedings;
- 2. obtaining judgment;
- 3. enforcement of judgment, such as:
a. statutory demands;
b. bankruptcy notices;
c. creditors petitions;
d. warrants for property seizure and sale; and
e. garnishee orders etc.
The RCR Recovery Team are familiar with the various enforcement methods in all Australian jurisdictions which can be utilised to recover monies owing, including assigned debts. We are also able to provide advice in relation to assigning a debt and your obligations once this occurs.
If you have any queries in relation to the above, please contact RCR Recoveries on 07 3009 8444.