THE LAW REFORM COMMISSION OF HONG KONG REPORT

THE REGULATION OF DEBT COLLECTION PRACTICES

This report can be found on the Internet at: <http://www.info.gov.hk/hkreform>

July 2002

The Law Reform Commission was established by the Executive Council in January 1 !"# The Commission considers such reforms of the laws of $on% &on% as may be referred to it by the 'ecretary for Justice or the Chief Justice# The members of the Commission at present are: The Hon Ms Elsie Leung Oi Sie, !M, "#, Se$ret%r& for "usti$e '(h%irm%n) The Hon Mr "usti$e *n+rew Li, (hief "usti$e Mr Ton& ,en, S!S, "#, L%w -r%ftsm%n -r "ohn !%$on.Shone Hon Mr "usti$e !okh%r&, #" Mr *nthon& (how Mr /i$tor (hu L%p.lik #rofessor , 0 1%n, "# Ms !ett& Ho Mr *l%n Hoo, S( Mr 0wong (hi 0in -r L%wren$e L%i, "# Hon Mrs Sophie Leung, S!S, "# Mr -%vi+ Smith The 'ecretary of the Commission is Mr Stuart M I Sto !r and its offices are at: 23/1 H%r$ourt House 45 lou$ester 6o%+ 7%n$h%i Hong 0ong Telephone: 1%<: E.m%il: 7e?site: 2829 3:;2 29=8 2532 hklr$>hkreform.g$n.gov.hk http://www.info.gov.hk/hkreform

THE LAW REFORM COMMISSION OF HONG KONG R!"ort T#! r!$ulat%o& o' (!)t *oll!*t%o& "ra*t%*!+
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CONTENTS Pa$! Pr!'a*!

Terms of reference The 'ub(committee 1 1 1 ) ) ) * + ! 1, 1, 1, 10 1* 1* 13 1+ 1+ 1+ 1! 1 1 1 ,1

-.

D!)t *oll!*t%o& %& Ho&$ Ko&$

Introduction Statistics on personal credit delinquency Statistics compiled by the Police Statistics compiled by the Hong Kong Monetary Authority Statistics compiled by the Privacy Commissioner for Personal Data Industry overview

2.

So/! '!atur!+ o' !0tra12u(%*%al (!)t *oll!*t%o&

'ta%es of debt collection -ifferent types of debt collection activities .on(/udicial debt collection 1hat causes abusive debt collection2 The nature of the debt collection process The lac of professionalism among some debt collectors !oose"lending #conomic do$nturn The %udicial process in debt recovery &ther factors

3.

E0%+t%&$ *r%/%&al +a&*t%o&+ a$a%&+t a)u+%4! (!)t *oll!*t%o&

Criminal law sanctions 'ntimidation Criminal damage to property

Threats to ill or murder Theft and blac mail Assault Mens rea for assault (alse imprisonment (orcible detention Triad offences Summary &ffences &rdinance )Cap **+, Post &ffice &rdinance )Cap -+, Criminal sanctions for participation The principal Secondary participation 4icarious liability Corporate liability

,, ,, ,) ,* ,3 ,! , 0" 01 01 01 01 00 00 0* 0* 0* 03 0+ 0+ 0 )" )" )1 )1 )* )* ) *" *" *" *" *" *3 *3 *+ * * 3" 31 31

5.

E0%+t%&$ *%4%l r!/!(%!+ 'or a)u+%4! (!)t *oll!*t%o&

Civil remedies for abusive debt collection Trespass to the person (alse imprisonment .emedies for assault/ battery and false imprisonment 'ntentional physical harm other than trespass to the person 0 'ntentional infliction of emotional distress Trespass to chattels Defamation 1egligence Liability for tortious acts committed by others Master and servant #mployer2s liability for independent contractors Principal2s vicarious liability for torts committed by agent 5ersonal -ata 65rivacy7 8rdinance

6.

Ot#!r ty"!+ o' *o&trol o& (!)t *oll!*t%o&

9dministrative control 'elf(re%ulation by authori:ed institutions Code of 3an ing Practice 4 5--6 Code of 3an ing Practice 4 December *775 5ersonal -ata 65rivacy7 8rdinance 6Cap )!37 and the Code of 5ractice on Consumer Credit -ata ,"", Personal Data )Privacy, &rdinance Code of Practice on Consumer Credit Data *77*

7.

D!'%*%!&*%!+ o' t#! !0%+t%&$ *o&trol+ o& a)u+%4! (!)t *oll!*t%o& "ra*t%*!+

Criminal law Civil claims 'elf(re%ulation by authori:ed institutions Code of 3an ing Practice 4 December *775

ii

5ersonal -ata 65rivacy7 8rdinance 6Cap )!37 and the Code of 5ractice on Consumer Credit -ata ; ,"",

3, 3) 3) 3) 3) 33 3+ 3+ 3+ 3! 3! 3 +" +" +1 +) +* +* +* ++ +! + + !" !1 !1 !1 !0 !) !* !* !* !3 !+ !! !! ! 1 1 , 0 * *

8.

Co/"arat%4! La9

Introduction <nited &in%dom The criminal offence of unla$ful harassment of debtors Protection from Harassment Act 5--6 #ngland and 8ales &ffence of harassment &ffence of putting people in fear of violence Civil remedy Scotland Malicious Communications Act 5-++ 9ustralia (ederal legislation Australian Competition 9 Consumer Commission v McCas ey 9 Cash .eturn Mercantile PT: !td &ther provisions against abusive collection tactics The <nited 'tates of 9merica The (air Debt Collection Practices Act 5-66 Harassment or abuse (alse/ deceptive/ or misleading representations or means ;nfair practices Communications in connection $ith debt collection Acquisition of location information (urther protection to consumers Canada (ederal Alberta =ainland China 8ther /urisdictions

:.

L%*!&+%&$ %& ot#!r 2ur%+(%*t%o&+

Introduction <nited &in%dom Criteria for licensing Criminal sanctions for operating $ithout a licence Civil sanctions for operating $ithout a licence 9ustralia .ew 'outh 1ales !icensing Police/ 1S8 Police .evie$ of the present 1S8 legislation 4ictoria Similar !egislation Canada Alberta

iii

'outh 9frica

+ 1"" 1"" 1"" 1"" 1"1 1", 1") 1") 1"* 1"3 1"! 1"! 1" 1" 11" 111 110 11) 11) 11+ 11+ 11 11 11 1," 1," 1,1 1,, 1,, 1,0 1,) 1,) 1,* 1,* 1,3 1,3 1,! 1,! 1, 1, 10" 10" 10, 10,

;.

Co&+u/!r *r!(%t (ata

Introduction 5ersonal -ata 65rivacy7 8rdinance Code of Practice on Consumer Credit Data 'harin% of positive credit data in other /urisdictions ;S (air Credit .eporting Act ;S #qual Credit &pportunity Act Australian Common$ealth Privacy Act ;nited Kingdom Data Protection Act 5--+ Situation in Hong Kong

-0.

Pro"o+al+ 'or r!'or/

The criminal offence of unlawful harassment of debtors and others .esponses <eneral or specific Modifications !a$ .eform Commission .eport on Stal ing &ther features of the offence Criminal sanctions for participation Licensin% .esponses ;K &ffice of (air Trading2s revie$ of the licensing system Conclusion on !icensing 8hether a person $ho no$ingly engages an unlicensed collection agency equally commits an offence Civil liability of a creditor in respect of the acts of the debt collector Commercial vs consumer debts .esponses Licensin% authority .esponses Collection a%encies and collectors .esponses Exemptions from licensin% .esponses Should credit insurers be e=empted> Should companies $ithin the same group be e=empted> &ther e=empted categories suggested 1amed organisations Collecting debts as a business or other$ise Criteria for licensin% .esponses .esidence status requirement &ther requirements Appeal mechanism 'tatutory powers and duties .esponses

iv

Code of practice .esponses <uideline of the Australian Competition and Consumer Commission Consumer credit data .esponses Revision to the Code of 5ractice on Consumer Credit -ata ; ,"", Credit application data (ile activity data Consumer credit scoring !enders2 participation in the sharing of information 8ay for$ard Efficiency of the /udicial process .esponses 'nterim .eport and Consultative Paper on Civil ?ustice .eform December *775 'elf(re%ulation .esponses Conclusion

10) 10) 10) 10 10 1)" 1)" 1)" 1)1 1)1 1), 1)0 1)0 1)0 1)) 1)) 1)* 1)3 1*1

--.

Su//ary o' r!*o//!&(at%o&+

A&&!0 - < R!+"o&+!+ to Co&+ultat%o& Pa"!r o& R!$ulat%o& o' D!)t Coll!*t%o& Pra*t%*!+ A&&!0 2 < ACCC=+ Gu%(!l%&!+

1*0

Pr!'a*!
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T!r/+ o' r!'!r!&*!

1# 8n 0" July 1 !> the Chief Justice and the 'ecretary for Justice referred the followin% matter to the Law Reform Commission: @To consider the adequacy of the e=isting la$ governing the $ay in $hich creditors/ debt collection agencies and debt collectors collect debts in Hong Kong $ithout recourse to the court system/ and to recommend such changes in the la$ as may be thought appropriateAB ,# The Law Reform Commission has been %reatly assisted by the findin%s of the 'ub(committee and wish to record here our appreciation of the hard wor? devoted to this reference by members of the 'ub(committee#

T#! Su)1*o//%tt!!
0# The 'ub(committee on Re%ulation of -ebt Collection 5ractices was appointed in .ovember 1 ! to consider and advise on the present state of the law and to ma?e proposals for reform# The sub(committee members are: T#! Ho& Mr Ju+t%*! Sa #ra&% )Chairman since September *777, Jud%e of the $i%h Court

Mr Ro)!rt G Kot!9all> SBS> 'enior Counsel SC )Cice"Chairman, Mr C#arl!+ D Boot# 9ssociate 5rofessor -epartment of 5rofessional Le%al Education <niversity of $on% &on% formerly 'ecretary @ Chief Ainancial 8fficer Airst Ecommerce 9sia Limited 'enior =ana%er 6Ban?in% -evelopment7 $on% &on% =onetary 9uthority

Mr Jo#& R Br!9!r M+ Car/a& ? F C#%u )member until March *777 and then since &ctober *775,

Mr Ju&%u+ K ? Ho M+ R%ta S C Ho Mr Ro)%& M*L!%+#

Council =ember The Law 'ociety of $on% &on% 9ssistant 5rincipal 'olicitor Companies Re%istry Barrister> Temple Chambers formerly -eputy 5rivacy Commissioner for 5ersonal -ata =ana%er> Customer 9ssistance 'tandard Chartered Ban? Chief 'uperintendent 68r%ani:ed Crime @ Triad Bureau7 $on% &on% 5olice Aorce 5rincipal 9ssistant 'ecretary 'ecurity Bureau 'enior Covernment Counsel Law Reform Commission

Mr+ R%ta L ? To&$ Mr T+a&$ Wa%1#u&$ )member since &ctober *775, M%++ El%@a K C ?au )member since August 5---, M+ Cat#y Wa& )Secretary,

)# Aormer members who contributed to the wor? of the 'ub( committee are: Ho& Mr Ju+t%*! L%tto&> GBM )Chairman until September *777, Mr P#%l%" K ? C#a& )member until August 5---, Mr T#o/a+ C#a& Wa%1 % )member until &ctober *775, M%++ Mar$ar!t Mary ? F L!o&$ )member from March *777 until &ctober *775, .on(permanent Jud%e of the Court of Ainal 9ppeal 6then7 5rincipal 9ssistant 'ecretary 'ecurity Bureau Chief 'uperintendent $on% &on% 5olice Aorce 'enior =ana%er $on% &on% =onetary 9uthority

*# The reference has been considered by the 'ub(committee and the Law Reform Commission over the course of 1! formal meetin%s# 4iews have also been exchan%ed by circulation of correspondence and informal meetin%s# 3# 8n ,! July ,"""> in order to see? views and comments from the community> the 'ub(committee issued a Consultation 5aper settin% out its initial proposals on the reference# 8ver 3" written responses were received> many of these were substantive with practical comments on the issues addressed in the Consultation 5aper# 1hile some reservations were ,

expressed about certain of the initial proposals for reform> the proposals were %enerally welcomed# The consultation exercise elicited responses from a wide ran%e of individuals and or%anisations> the list of which is at 9nnex 1# +# 1e wish to express our than?s to all those who responded to the Consultation 5aper# 1e would li?e to than? the <& -irector Ceneral of Aair Tradin%> and the <& Information Commissioner 6formerly> the -ata 5rotection Commissioner7 for providin% assistance and informationD and the 9ustralian Competition and Consumer Commission for their assistance and ?ind permission to annex part of their %uidelines to this Report# 1e than? Credit Information 'ervices Ltd> the $on% &on% =onetary 9uthority> the $on% &on% 5olice Aorce> and the 5rivacy Commissioner for 5ersonal -ata for providin% statistical data contained in this Report#

C#a"t!r D!)t *oll!*t%o& %& Ho&$ Ko&$

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I&tro(u*t%o&
1#1 It is a fundamental precept in our society that individuals should honour their debt obli%ations# Eet> it is eFually important that debtors and members of the public %enerally should be protected by law from debt collection methods that overstep the bounds of acceptable pressure#

St%tisti$s on person%l $re+it +elin@uen$&

1#, 9ccordin% to data published by Credit Information 'ervices Ltd 1 6GCI'H7> the total number of records of personal credit delinFuency reported to it rose from a total of *!>+ , durin% the second half of ,""" to 3 >,"! durin% the first half of ,""1> representin% an increase of nearly 1+#+I# The fi%ure further rose to 1"*>!1* durin% the second half of ,""1> representin% an increase of *0I# -etails are %iven in the followin% chart:
140000 132,947

120000 105,815 100000

80000

73,597 69,208

60000 45,494 40000 29,734 26,946

58,145

58,792

20000

No. of delinquent records

0 2nd ha lf 1997 1st ha lf 1998 2nd ha lf 1998 1st half 1999 2nd half 1999 1st half 2000 2nd ha lf 2000 1st half 2001 2nd ha lf 2001

Year

1#0 'tatistics compiled by CI' also showed that the total number of users of consumer credit reported as failin% to meet their debt repayment obli%ations rose from 10>"11 durin% the second half of ,""" to 1+>1) durin%
1

Credit Information 'ervices Ltd is $on% &on%Js main consumer credit bureau and its business is to maintain credit information database and to provide consolidated credit reports on individuals to its members for credit evaluation# Its members are mainly comprised of ban?s and ma/or financial institutions#

the first half of ,""1> representin% a %rowth rate of nearly 01#!I# The fi%ure for the second half of ,""1 rose further to 0 >11*> representin% an increase of 1,!I# The table below shows the details:
.o# of loans carried by sin%le consumer @ bein% reported delinFuent 1 , 0 ) * 3 + ! or above Total no# of consumers bein% reported delinFuent durin% the period Total no# of delinFuent records bein% reported durin% the period 9vera%e no# of delinFuent records per consumer .o# of Consumers Bein% Reported -elinFuent ,$ 1 + 1$ 1 ! ,$ 1 ! 1$ 1 ,$ 1 1$ ,""" ,$ ,""" 1$ ,""1 ,$ ,""1

Individual Individual Individual Individual Individual Individual Individual Individual Individual 1*>*", )>!++ !*3 ,*+ )3 11 11 ) ,1>330 1">)*1 ,>)11 1>,," 3*) 011 1+* 1,* +" 1*3 1*>*+0 1)>1!" )>*,1 ,>0"3 1>1++ +,1 )"+ ,*" ,"" )+1 ,)>,00 1!>)"" +> *) )>3 0>"0 ,>"! 1>)+" 1>"+1 +)0 0>""! ),>)+0 +>) 0>"*, 1>3)+ 1>01+ +* 3+" 3", )+1 ,>000 1!>*33 )> *+ ,>1++ 1>)"* 1>"1" +3* 31) *1+ 0+" 1>!+" 10>3!* )>*! 1> *+ 1>)," !+) 3 ! * , )!3 0!* ,>"1" 10>"11 +>" ,>310 1>*)+ 1>1") !!1 33) ) 3 )+3 ,>,3 1+>1) 1)>*11 *> !, 0>! " ,>3 3 1> !" 1>3" 1>0!3 1>111 *> *" 0 >11*

, >+0)

,3> )3

)*>) )

10,> )+

+0>* +

*!>1)*

*!>+ ,

3 >,"!

1"*>!1*

1#0+

1#+0

1#!!

0#10

0# 3

)#,*

)#*,

)#")

,#+1

St%tisti$s $ompile+ ?& the #oli$e

1#) 'tatistics compiled by the $on% &on% 5olice on reports it receives from the public relatin% to debt collectin% activities show an increase in non(criminal reports and a decrease in criminal reports# 9s can be seen from the chart below>, the number of crime reports has continued to decline since 1 > from 0>)," cases in 1 to ,>) ! in ,"""> and to 1> * cases in ,""1# 8n the other hand> non(crime reports have been on the increase> 0 su%%estin% that the problem of harassment type collection tactics is worsenin%#

, 0

Compiled by the 8r%ani:ed Crime @ Triad Bureau of the $on% &on% 5olice in 8ctober ,""1# -ebt collectin% related reports> includin% non(crime reports> have shown a substantial increase as a result of Knew data capture proceduresJ implemented since -ecember 1 !#

18000 16000 14000 No. of Reports 12000 10000 8000 6000 4000 2000 0 Crim e Reports Non-Crim e Reports otal 447 0 447 1997 447 0 447 1,672 1,672 0 1998 1,672 0 1,672 1999 3,420 6,115 9,535 6,115 3,420 2,498 1,959 11,251 9,535 8,753 15,312 13,353

2000 2,498 8,753 11,251

2001 1,959 13,353 15,312

1#* In ,""1> criminal dama%e accounted for a ma/ority 61>) + reports> +3#)I7 of the 1> * crime reports received# These crimes were usually in the form of splashin% paint and /ammin% of door loc?s with %lue at the victimsJ addresses# Criminal intimidation L blac?mail 6,31 reports> 10#0I7 came second and were usually committed by way of verbal abuses throu%h the use of telephones# The remainin% ,"1 reports 61"#0I7 involved assault> arson> false imprisonment> robbery L theft or other crimes# 9 brea?down of the crimes committed is shown in the table below: Cr%/!+ Co//%tt!( A200-B Cr%/%&al Da/a$! Cr%/%&al I&t%/%(at%o& C Bla* /a%l A++ault O**a+%o&%&$ A*tual Bo(%ly Har/ C Wou&(%&$ Ar+o& Ot#!r+ Fal+! I/"r%+o&/!&t Ro))!ry C T#!'t Total No. o' R!"ort+ 1>) + ,31 " )1 0* ,0 1, 1> * P!r*!&ta$! +3#)I 10#0I )#3I ,#1I 1#!I 1#,I "#3I 1""#"I

1#3 9mon% the 10>0*0 non(crime reports recorded in ,""1> 0,#3I of the cases involved un?nown creditors: either because the debtor could not be located or was uncooperative> or because several loans were owed to different creditors# The remainin% non(crime reports were mostly lin?ed to loans made by finance companies> individuals> commercial companies> credit card companies> ban?s and =acau loanshar?s# -etails can be found in the table below:

No&1*r%/! R!"ort+ A200-B Cr!(%tor+ U& &o9& Cr!(%tor+ F%&a&*! Co/"a&%!+ I&(%4%(ual+ Co//!r*%al Co/"a&%!+ Cr!(%t Car( Co/"a&%!+ Ba& + Ma*au Loa&+#ar + T!l!*o//u&%*at%o& Co/"a&%!+ HK Loa&+#ar + Cro++ Bor(!r Tra(! Total No. o' R!"ort+ )>0*) ,>31, 1>0 0 1>0!" 1>0"" 01 1 ,3) +* *0 10>0*0 P!r*!&ta$! 0,#3I 1 #3I 1"#)I 1"#0I #+I +#"I +#)I ,#"I "#3I "#)I 1""#"I

1#+ The harassment tactics commonly employed a%ainst debtors> and innocent third parties such as friends> loan referees> family members or business partners are shown in the table below:

Hara++/!&t Ta*t%*+ A200-B T!l!"#o&! Nu%+a&*! A/a %&$ &u/!rou+ (u&&%&$ t!l!"#o&! *all+> +o/!t%/!+ (ur%&$ t#! !arly #our+ %& t#! /or&%&$B D%+%t A/a %&$ r!"!at!( 4%+%t+ to t#! (!)tor=+ C 4%*t%/=+ #o/! or o''%*!B Ot#!r+ A+!&(%&$ &u/!rou+ (u&&%&$ l!tt!r+> "o+t%&$ o' (!)t *oll!*t%o& &ot%*!+ out+%(! t#! (!)tor=+ a((r!++ to *au+! !/)arra++/!&tB M%&or A++ault Total

No. o' R!"ort+ )>+ 0 )>1!! )>0,3

P!r*!&ta$! 0*# I 01#)I 0,#)I

)3 10>0*0

"#0I 1""#"I

St%tisti$s $ompile+ ?& the Hong 0ong Monet%r& *uthorit&

1#! The $on% &on% =onetary 9uthority has compiled statistics on abuses in connection with debt collection reported to its debt(collection hotline> which was set up in 9pril 1 3 to provide advice to complainants# The chart below shows the total number of complaints received in each year> and the number in respect of the different types of complaints# Except for the year 1 durin% which there was a mar?ed decrease in the number of complaints> the number of complaints each year rose from over ,"" in 1 3 and 1 + to over )"" in ,""1# The number of nuisance and intimidation complaints have risen while that of violence complaints have remained %enerally stable#

1 3 1 + 1 ! 1 ,""" ,""1

Nu%+a&*!5 ,"" 1+ ,)* 1,+ ,*, , 3 1>,

I&t%/%(at%o&6 +" 01 )3 0* 33 1,3 0+)

D%ol!&*!7 1" ! 1" ! ,1 33

Po+t%&$ Not%*!8 , " " " " " ,

Total 2:2 2-: 30-80 33; 53->85-

1# 9 brea?down of the complaints accordin% to the status of the complainants is shown in the chart below# In 1 3> the ma/ority of complaints were made by third(parties> includin% family members> friends and un(related parties# In ,""1> however> the ma/ority of complaints were made by debtors# This is due to an almost three times increase in debtorsJ complaints since 1 3# The number of complaints made by referees have decreased# Fa/%ly /!/)!r+ or No&1r!lat!( 'r%!&(+ o' (!)tor+ "art%!+ 1)+ 1! ! 1, 1"* 1 *+ ) !0 ,0 11 0+ 3" 110

1 3 1 + 1 ! 1 ,""" ,""1

1"

D!)tor+ * 1") 1+0 1"! ,01 ,+, !0

R!'!r!!+ ,, ) ) 1 , 0 03

Total 2:2 2-: 30-80 33; 53->85-

St%tisti$s $ompile+ ?& the #riv%$& (ommissioner for #erson%l -%t%

1#1" The 5rivacy Commissioner for 5ersonal -ata 6Gthe 5rivacy CommissionerH7 also receives complaints concernin% debt collection activities# In the period from ," -ecember 1 3 to 01 -ecember ,""1> the 5rivacy Commissioner received a total of ,>+!0 complaints of suspected breaches of the 5ersonal -ata 65rivacy7 8rdinance 6Cap )!37# 8f these> 0,* complaints
)

* 3 + !

1"

.uisance ; such as phone calls usin% foul lan%ua%e> persistent phone calls> anonymous phone calls> phone calls at unreasonable hours> freFuent visits> pesterin% the debtorJs referees> family members> friends> employer> or collea%ues for information about the debtorJs whereabouts> puttin% up postersLwritin% on the walls 6i#e# spray paint7 in the vicinity of the debtorJs residence# Intimidation ; such as ma?in% abusive or threatenin% remar?s to the debtorLthe complainant 6e#%# threat to set fire> threaten the complainantsJ personal safety> etc7# 4iolence ; such as /ammin% the door loc?> ?ic?in% the door or %ate with %reat force# 5ostin% notice to publicise the debtorJs indebtedness in the vicinity of the debtorJs residence or wor?place# Coverin% 9pril ; -ecember only since the hotline was established in 9pril 3# .on(related parties include ex(tenant> ex(resident> debtorJs employer or collea%ue# 'ee foot(note ! above

involved practices of debt collection activities# The followin% table %ives a yearly brea?down of the fi%ures# D!)t *oll!*t%o& Co/"la%&t+ ," )) *, 1"0 1"3 326 Total Co/"la%&t+ ,0+ 0 , *)1 3 , ,1 2>8:3

3(1 + 1 ! 1 ,""" ,""1 Total

P!r*!&ta$! AEB !I 11I 1"I 1*I 1,I

1#11

=alpractices alle%ed by complainants included the followin%: 'endin% of unsealed correspondence concernin% debts# 5ostin% up of demand letters in public places# 5ostin% up of copies of the debtorJs identity card in public places# =ailin% or faxin% of demand notices to the debtorJs employer or nei%hbours# -emandin% repayment of a debt from person who is neither the debtor nor a %uarantor# 9busive and threatenin% messa%es#

1#1, The 5rivacy Commissioner observed that complaints about debt collection activities en%a%ed by mobile service operators have increased> and the ma/ority of these complaints concerns the transfer of disputed overdue payments to appointed debt collectors# 1#10 It is worth mentionin%> however> that of the 0,* complaints> only *! cases were found to have sufficient evidence to establish a breach under the 8rdinance# 'o far> the 5rivacy Commissioner for 5ersonal -ata have issued ,) warnin% letters and one enforcement notice in relation to cases that were found in contravention of the 8rdinance#

I&(u+try o4!r4%!9
1#1) The debt collection industry in $on% &on% comprises a wide spectrum of mar?et operators> includin% international and local a%encies# There are also poorly mana%ed and unscrupulous a%encies some of which employ people who have> or claim to have> triad bac?%rounds# 11 There are no official statistics on the number of debt collection a%encies operatin% in $on% &on%# 9ccordin% to one collection a%ency> there are now approximately 1"" to 1*" collection a%encies> with five to ten ma/or players# 9nother source believed that there are about 0" active collection a%encies of which not more
11

9ccordin% to 5olice fi%ures )1 KimproperJ debt collection a%encies were identified in ,""1#

than six are %enerally considered well(mana%ed and si:eable with over *" members of staff# 1#1* The top end of the debt collection industry is run in a professional and ethical manner# These a%encies usually have many years of experience and have %oodwill to protect# 'trict policies are developed in matters of recruitment> trainin%> supervision> and the handlin% of complaints# 'trin%ent and detailed codes of practice for collection are also laid down for the collection staff> coverin% different aspects of debt collection includin% the manner in which telephone calls and personal visits should be conducted> the contents and si%nin% authority of demand letters> the way in which payments made by debtors should be handled> and the obtainin% and security of personal data# 1#13 The success rate of these well(mana%ed debt collection a%encies is %enerally not very hi%h# 8ne established debt collection a%ency stated that its successful collection rate is about ,"I and 1"I for telecommunications assi%nments and ban?Lfinance assi%nments respectively# 1#1+ The debt collection business has under%one rapid %rowth and chan%es in recent years# This is lin?ed to the fact that in $on% &on%> as in other advanced economies> the extension and use of consumer credit have increased substantially# 9s at the end of 1 3> consumer debt 1, extended by the ban?in% sector10 stood at $&M1,3>!0 million# The fi%ure %rew to $&M1*1>",1 million as at end of 'eptember ,""1# 8n credit card debt alone> the fi%ure increased to $&M*0>""+ million as at end of 'eptember ,""1# 1#1! 9ccordin% to unofficial estimates1) the number of credit cards in circulation in $on% &on% in 'eptember ,""" amounted to #+ million> out of which 3#+ million were issued by authori:ed institutions# 1* By end of ,""1> the number of credit cards issued by authori:ed institutions had increased to #, million# The default rate of repayments has increased since the economic downturn in late 1 +# Ai%ures collated by the $on% &on% =onetary 9uthority for the Fuarter endin% -ecember ,""1 revealed a rise in the annualised char%e(off ratio13 to !#,+I from *#00I in the previous Fuarter# 1+ 9ccordin% to the $on% &on% =onetary 9uthority> the worsenin% of the fi%ures reflects a deterioration in the Fuality of credit card portfolios> relatin% in particular to the

1,

10 1) 1* 13

1+

Consumer debt here refers to loans incurred by private individuals and professionals in relation to credit card and for other purposes> but excludin% those in relation to the acFuisition of residential properties# i#e# 9uthori:ed institutions as defined in the Ban?in% 8rdinance 6Cap 1**7# 3an ing 8orld> 'ept ,""" issue> $on% &on% Institute of Ban?ers# 9s defined in the Ban?in% 8rdinance 6Cap 1**7# Char%e(off ratio refers to the total amount of credit card receivables written off durin% a period as a percenta%e of the total credit card receivables at the end of that period# The char%e(off policy may vary amon% authori:ed institutions# .ormally> an account will be written off when the receivable has been overdue for more than 1!" days or when the ultimate repayment of the receivable is unli?ely 6e#%# the cardholder is ban?rupt or cannot be located7# To facilitate comparison amon% authori:ed institutions 6especially for those which may provide char%e(offs at different intervals durin% the year7> the char%e(off ratio is annualised# Aor the Fuarter endin% -ecember ,"""> =arch ,""1 and June ,""1> the fi%ures are 0#+1I> 0#3!I and )#3I#

1"

sharp rise in personal ban?ruptcies#1! .evertheless> due to intense competition> ban?s are still actively promotin% their credit card business by means of %ifts and other incentives> and new credit cards are issued by ban?s lar%ely without ?nowled%e of the number of other credit cards already held by their customers as complete information on this is currently not available to them# 1#1 9nother reason su%%ested for the rapid %rowth of the debt collection industry is that since June 1 1> debtors could no lon%er be imprisoned for non(payment of debts followin% the enactment of the Bill of Ri%hts 8rdinance 6Cap 0!07#1 9ccordin%ly> whereas creditors relied mainly on the court system to recover debts in the past> they had relied more on extra(/udicial means of debt recovery after the enactment of the $on% &on% Bill of Ri%hts 8rdinance 6Cap 0!07# 1#," 9 consumerJs failure to repay a debt may arise from a variety of circumstances# In some cases a consumer may deliberately try to avoid repayment# In others> default arises from over(commitment or chan%es in financial circumstances resultin% from unemployment> business failure> health problems or divorce# -efault may also arise because of dispute as to the validity or amount of the debt# 9 study ," found that the causes of default included initial mis/ud%ement of the ability to repay> the incurrin% of additional obli%ations> extrava%ance by the debtor and> in some cases> plain dishonesty#

1!

,"

$owever> the fi%ures have also been affected si%nificantly by chan%es in the char%e( off policy of a number of institutions which are now char%in% off bad debts earlier than before> in particular when a ban?ruptcy petition is presented rather than when a ban?ruptcy order is made# 1ithout the chan%e> the char%e(off ratio would have been sli%htly under +I for the -ecember ,""1 Fuarter# By the enactment of the $on% &on% Bill of Ri%hts 6Cap 0!07 on ! June 1 1> certain provisions of the International Covenant on Civil and 5olitical Ri%hts were incorporated into the law of $on% &on%# By virtue of 9rticle +> no one shall be imprisoned merely on the %round of inability to fulfil a contractual obli%ation# 9ustralian Law Reform Commission> Report .o# 03#

11

C#a"t!r 2 So/! '!atur!+ o' !0tra12u(%*%al (!)t *oll!*t%o&

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Sta$!+ o' (!)t *oll!*t%o&

,#1 sta%es:1 617 6,7 607 The debt collection process can %enerally be divided into three the creditor or an a%ent actin% on his behalf ma?es non(/udicial attempts at collectionD the creditor brin%s a court action for recovery of the debtD and the court ma?es an order for payment> which is followed by attempts at enforcement#

,#, The whole process of debt recovery may be> and sometimes is> protracted# This protracted process> however> has a useful Gfilter effectH# 9t each sta%e> there should be and are fewer cases than at the previous sta%e> either because of settlement of the debt or the creditorJs decision to abandon pursuit#, Civen its terms of reference> this Report examines only the first sta%e of debt collection# It is> however> useful to bear in mind that the sta%es of debt collection are inter(related# The effectiveness of the later sta%es of debt collection have a bearin% on an earlier sta%e# Conversely> if the preliminary sta%e is ineffective or stifled> more cases would have to continue on to the later sta%es#

D%''!r!&t ty"!+ o' (!)t *oll!*t%o& a*t%4%t%!+

,#0 -ebt collection involves the exertion of pressure on the debtor# There is sometimes only a fine line between acceptable and unacceptable debt collection activities# -ebt collection activities can be broadly cate%orised into three types: those which are le%itimate> those which include some form of harassment> and> lastly> those which involve activities which are clearly criminal in nature# ,#) Collection tactics encountered in $on% &on% that amount to criminal offences include:

'cottish Law Commission> .eport on Diligence and Debtor Protection 61 !*7 at pa%e # 'cottish Law Commission> cited above> at pa%e 11#

1,

ma?in% threatenin% telephone callsD sendin% obscene or offensive fax messa%esD /ammin% %lue into door loc?s of the debtorJs homeD splashin% paint outside the debtorJs homeD chainin% up the door or %ate of the debtorJs homeD obtainin% by bribery the debtorJs particulars from public utility companiesD intimidationD false imprisonmentD assaultD and arson#

,#* $arassment or nuisance type tactics are often employed to collect debts# 9lthou%h less dan%erous in nature than the clearly ille%al debt collection tactics> the use of harassment is widespread and a cause for serious concern in $on% &on%# Examples are:

pesterin% the debtor with persistent phone callsD embarrassin% the debtor by publicisin% his particulars and information on the outstandin% debtD sendin% open faxes to the debtorJs office or wor?placeD and pesterin% the debtorJs referees> family members and friends either for repayment or information about the debtorJs whereabouts# 8ther improper practices in debt collection include:

,#3

usin% false names to communicate with the debtorD ma?in% anonymous calls and sendin% unidentifiable notes to the debtor to avoid bein% traced by policeD switchin% off a tape(recorder used by a debt(collectin% a%ency to monitor its staff before ma?in% abusive or threatenin% remar?s to the debtorD and sub(contractin% debt collection wor? to a third party ?nown to use improper methods#

No&12u(%*%al (!)t *oll!*t%o&

,#+ The non(/udicial debt recovery process is sometimes referred to as the pre(action sta%e or the informal collection sta%e# In one study 0> the followin% observations were made on extra(/udicial debt recovery: @The vast ma%ority of outstanding debts are collected by the efforts of the creditor himself or his agent $ithout the commencement of an action against the debtorA The principal reason is economicD debt collection by one2s o$n collection department or by a collection agency is li ely to be much cheaper than debt collection by a la$yerA The creditor may
0

Institute of Law Research and Reform of Edmonton> 9lberta> Debt Collection Practices 6Report .o ), June 1 !)7#

10

steer a$ay from legal action for other reasons/ including a desire to eep the debtor as a potential customer/ but the cost factor is probably the most important reason for using some form of e=tra"%udicial collection method in preference to an e=pensive la$suitAB) ,#! The Creditors 'urvey* compiled by the Central Research <nit 6Gthe C#R#<# Creditors 'urveyH7 of the 'cottish 8ffice yielded similar findin%s: @8hen default in payment of a debt occurs/ the creditor usually pursues its recovery by means of Einformal2 techniques such as reminders or letters threatening legal proceedingsA 'n the early stages/ the creditor normally has an interest in retaining the debtor as a customer and $ill usually be an=ious not to dissipate good$ill/ at least until more information becomes available on the nature of the default and the debtor2s intentions or ability to payAB3 ,# The same survey further found that the scale of default which reFuired some form of pursuit varied from one in four of all accounts to one in ten# 9fter creditors have exhausted their own informal recovery procedures> about three(Fuarters of them passed over the details of the debt to a debt collection a%ency or a solicitor# -ebt collection a%encies usually write further letters and may visit the debtor before decidin% whether a court action is worthwhile#+ ,#1" Aurther> accordin% to the C#R#<# Creditors 'urvey: @All creditors said that $hile their aim $as to secure as quic and ine=pensive settlement as possible/ they $ish to retain customers/ and they are sympathetic to debtors2 genuine problems/ such as bereavement/ illness and unemploymentA All creditor organisations stressed ho$ difficult it is for them to no$ the debtor2s circumstances/ and that the initiative lies $ith the debtor to inform the creditor of the reasons for defaultA All creditors said they $ere prepared to agree to alternative payment arrangements if the debtor $as unable to pay at onceAB! ,#11 The same view was echoed in a Canadian study that stated: @Creditors and collectors uniformly say that they are an=ious to discover $hy the debt is not being paid/ and if the reason is misfortune or some defence to the claim/ this information $ill be

) * 3 + !

9s above> at para%raph ,#1# Report .o# !> Central Research <nit 5apers 61 !17# 'cottish Law Commission> .eport on Diligence and Debtor Protection 61 !*7 at para%raph ,#13# 9s above# 9s above#

1)

ta en into accountAB ,#1, 9lthou%h empirical data was not available> the C#R#<# Creditors 'urvey found that informal recovery procedures resulted in satisfactory arran%ements for payment in the %reat ma/ority of default debts> and estimated that in many or%anisations the proportion of default debt cases reachin% the court sta%e was less than 1I#1" ,#10 These studies indicate that the extra(/udicial debt collection process is beneficial to society at lar%e# -ebts are repaid more speedily without immediate recourse to the /udicial system# Considerable public resources can be freed for other uses# In the followin% para%raphs we examine the factors which contribute to the occurrence of abuse#

W#at *au+!+ a)u+%4! (!)t *oll!*t%o&F

,#1) include (

Aactors which contribute to improper debt collection practices the nature of the debt collection process the lac? of professionalism amon% some debt collectors loose(lendin% economic downturn shortcomin%s in the /udicial process of debt recovery#

The n%ture of the +e?t $olle$tion pro$ess

,#1* -ebt recovery or collection involves the exertin% of pressure on the debtor# 9 debt(collection a%ency is li?ely to adopt more a%%ressive tactics than the creditor because the collection a%ency is often retained only after the creditor has made substantial efforts to collect the debt itself# Collection a%encies usually char%e their clients on a Gno collect> no payH contin%ency basis# In the event that a debt is successfully collected> the collection a%ency will retain a percenta%e of the amount# The percenta%e may ran%e from 1"I to 3"I>11 dependin% on the amount recovered> the a%e of the account> and the value of the business between the a%ency and the client# 'ince collection a%encies char%e clients on a contin%ency basis> individual debt collectors are usually paid a small salary plus commissions or bonuses# 9n individual debt collectorJs monthly remuneration> as well as the a%encyJs earnin%s> therefore> lar%ely depends on the ability to pressure debtors into effectin% repayment after debtors have ne%lected or refused to pay creditors directly#

The l%$k of profession%lism %mong some +e?t $olle$tors

Institute of Law Research and Reform of Edmonton> 9lberta> cited above> at para%raph 3#,!# 'cottish Law Commission> cited above> at para%raph ,#1+# Institute of Law Research and Reform of Edmonton> 9lberta> cited above> at para%raph ,# #

1" 11

1*

,#13 1hilst operators at the top(end of the debt collection industry may be reasonably well Fualified and experienced> surveys indicate there is often a lac? of professionalism amon% debt collection a%encies# In 9lberta> for instance> where debt collectors are reFuired to be licensed> there is no educational reFuirement to become a debt collector# 1, The Institute of Law Research and Reform of Edmonton> 9lberta> found that collectors in %eneral have no more than a %rade 1, education> 10 and complaints have been received about the absence of trainin% for would(be collectors# ,#1+ 1e are not aware of any formal survey conducted in $on% &on% on the educational level of debt collectors> but a newspaper article 1) found that debt collectors come from all wal?s of life# The bac?%round of three debt collectors was considered: Case .o# 1 This debt collector %raduated from a Canadian <niversity with a de%ree in economics in 1 +# $e was introduced by a friend to a debt collection a%ency and became a debt collector because he had difficulty findin% other /obs# 'ince he had only six monthsJ experience in the debt collection business> he was responsible only for collectin% small debts# $is clients were mainly credit card companies> mobile phone companies and money(lenders# $e had a basic salary of five thousand dollars> and would %et a commission of three to four per cent of any recovered debt# The amount of commission he received would not exceed one thousand dollars a month on avera%e# $is collection method was to phone up the debtors constantly to annoy them> and to use foul lan%ua%e to intimidate them# $e claimed he had never employed ille%al tactics# Case .o# , This debt collector was a Aorm * %raduate> and> li?e the collector in Case .o# 1> was introduced by a friend to a debt collection a%ency because he was unable to find other employment# $e had been a debt collector for three years and his avera%e earnin%s did not exceed seven thousand dollars a month# 9lthou%h he was eli%ible for a commission of five to six per cent of the recovered debt> he mentioned that the rate of successful recovery was less than ten per cent %iven the economic downturn# $e admitted he had occasionally resorted to ille%al tactics to recover debts# $is usual collection tactic was to pay personal visits to the debtors to%ether with two other collea%ues# Case .o# 0 This collector has been in the business for ten years and claimed to be a senior member of the debt collection a%ency# $e had a basic salary
1, 10 1)

9s above> at para%raph ,#+# 9s above> at para%raph ,#1"# The eFuivalent of Crade 1, in $on% &on% is Aorm 3# Ming Pao Daily 1e$s> 1 9pril 1 ! at pa%e A,#

13

of ei%ht thousand dollars and a commission of six to ei%ht per cent of the recovered debt# $is avera%e monthly earnin%s amounted to around twenty thousand dollars# $e had many ways of obtainin% the contact details of debtors> such as bribin% the staff of some telephone companies> pa%er companies and even some %overnment departments# 8ther sources of information include the =arria%e Re%istry> Companies Re%istry and car(dealers# This collector usually paid personal visits to the debtors and claimed a success rate of between 1" per cent to ," per cent# $e admitted he had used ille%al tactics> and he claimed that debtors were usually reluctant to report them to the police#

Loose.len+ing
,#1! There is a view that part of the reason for defaults in repayment lies in the availability of easy credit# 1* Certain financial institutions are willin% to accept hi%h ris?s in return for the hi%h profit mar%in of credit cards and the personal loan business# 'ome creditors do not exercise sufficient care to ascertain the financial standin% of applicants before %rantin% loans or other credit# 9n a%%ressive provider of credit is a dan%er> not only to the debtor> but also to the debtorJs other creditors whose loans or other credit may have been responsibly %ranted#

E$onomi$ +ownturn
,#1 9 ma/or cause of the increase in repayment defaults is the economic downturn> which has resulted in users of consumer credit who were credit(worthy at the time the credit was %ranted becomin% unemployed or sufferin% pay(cuts# Aor example> the 9ustralian Law Reform Commission in its Report on -ebt Recovery and Insolvency 13 found that the most important cause of non(business debt default was an unexpected chan%e in economic circumstances#

The Au+i$i%l pro$ess in +e?t re$over&

,#," 9t the be%innin% of this chapter> we mentioned that the sta%es of debt collection are inter(related in that the effectiveness of the later sta%es of debt collection have a bearin% on that of the preliminary sta%eD and> similarly> if the preliminary sta%e is ineffective> more cases will proceed to the later sta%es# 9lthou%h the efficiency of the /udicial process for recoverin% debts is outside this ReportJs terms of reference> it is briefly discussed in Chapter 1" of this Report#

1* 13

In fact> it has been commented that the most effective debt recovery is the maintenance of %ood credit control# J Richardson> Debt .ecovery in #urope> at pa%e 1*"# 9ustralian Law Reform Commission> Report .o# 03> at para%raph ,1#

1+

Other f%$tors
,#,1 1e have set out above some factors that contribute towards the occurrence of defaults and may lead to abusive debt collection# 8ther factors> such as whether or not there are sufficient le%al deterrents a%ainst abusive debt collection> are examined in Chapters 0 ; 3 in this Report#

1!

C#a"t!r 3 E0%+t%&$ *r%/%&al +a&*t%o&+ a$a%&+t a)u+%4! (!)t *oll!*t%o&

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Cr%/%&al la9 +a&*t%o&+

0#1 In this chapter> we examine various criminal offences that may be applicable to debt collection activities#

Bntimi+%tion
0#, The offence of intimidation is provided for in section ,) of the Crimes 8rdinance 6Cap ,""7: @Any person $ho threatens any other person " )a, )b, $ith any in%ury to the person/ reputation or property of such other personD or $ith any in%ury to the person/ reputation or property of any third person/ or to the reputation or estate of any deceased personD or $ith any illegal act/

)c,

$ith intent in any such case " )i, )ii, to alarm the person so threatened or any other personD or to cause the person so threatened or any other person to do any act $hich he is not legally bound to doD or to cause the person so threatened or any other person to omit to do any act $hich he is legally entitled to do/

)iii,

shall be guilty of an offenceAB 0#0

1

In . v !o Tong Kai1 a defendant was convicted of criminal

1 ++ $&LR 1 0#

intimidation and sentenced to three monthsJ imprisonment# The conviction was set aside on appeal because of doubts concernin% the extent to which the surroundin% circumstances were ta?en into consideration# =c=ullin J made some observations on the reFuirements of section ,): @To my mind therefore it $as of the greatest importance that the court should have considered $hether the $ords used $ere E$ild and $hirling $ords2 uttered in e=asperation by a man driven beyond the point of endurance by opposition offered to him in his legitimate rights as o$ner of premises/ and signifying nothing more than an instinctive outburst of spleen/ or $hether they $ere uttered $ith a genuine intention of causing fear or $ere/ in the circumstances of their utterance/ li ely to produce that effectBA, 0#) The case of . v Chan Kai Hing0 shows how section ,) applies to debt collection activities# The appellant was a debt collector who> to%ether with another collea%ue> went to the home of a debtor who owed a ban? a sum of money# 9n ar%ument ensued at the door> and the debtor alle%ed that the debt collector had uttered a threat that if the debtor did not repay> then the debt collector would set fire to the flat# The debt collector maintained that there was some dispute but no utterance as alle%ed> and that the visit was a lawful debt collection exercise# The debt collector was convicted by the ma%istrate of one count of criminal intimidation# The ma%istrate> however> made some inconsistent remar?s concernin% the mens rea of the debt collector# 9t one point> the ma%istrate said that the debt collectorsJ comments were said Gin the heat of the moment 6and7 that there was no premeditationH# Later> on sentencin%> the ma%istrate said that at the time the debt collector made the threats> he made them with the intent of alarmin% the debtor# Civen the inconsistent remar?s> the $i%h Court> on appeal> held that there was some doubt as to whether the ma%istrate had considered the issues raised in the case of . v !o Tong Kai>) and the court decided to set aside the conviction due to a lur?in% doubt as to whether the conviction was safe or satisfactory# 0#* 1hile section ,) of the Crimes 8rdinance 6Cap ,""7 deals with threats> 'ection ,* deals with assaults and reads: C*ss%ults with intent to $%use $ert%in %$ts to ?e +one or omitte+ Any person $ho beats or uses any violence or force to any person $ith intent in any such case to cause such person or any other person to do any act $hich he is not legally bound to do/ or to omit to do any act $hich he is legally entitled to do/ shall be guilty of an offenceAB 0#3 9ny person who is %uilty of section ,) or ,* is liable on summary conviction to a fine of M,>""" and to two yearsJ imprisonment and is
, 0 )

9s above> at pa%e 1 3# N1 +O 0 $&C *+*# N1 ++O $&LR 1 0#

,"

liable on conviction upon indictment to five yearsJ imprisonment# *

(rimin%l +%m%ge to propert&

0#+ If a debt collector dama%es or destroys property belon%in% to another> or threatens to do so> such acts are covered by sections 3" and 31 of the Crimes 8rdinance 6Cap ,""7: @=3. -estro&ing or +%m%ging propert&

)5, A person $ho $ithout la$ful e=cuse destroys or damages any property belonging to another intending to destroy or damage any such property or being rec less as to $hether any such property $ould be destroyed or damaged shall be guilty of an offenceA )*, A person $ho $ithout la$ful e=cuse destroys or damages any property/ $hether belonging to himself or another " )a, intending to destroy or damage any property or being rec less as to $hether any property $ould be destroyed or damagedD and intending by the destruction or damage to endanger the life of another or being rec less as to $hether the life of another $ould be thereby endangered/

)b,

shall be guilty of an offenceA )F, An offence committed under this section by destroying or damaging property by fire shall be charged as arsonA =D. Thre%ts to +estro& or +%m%ge propert&

A person $ho $ithout la$ful e=cuse ma es to another a threat/ intending that other $ould fear it $ould be carried out/ " )a, )b, to destroy or damage any property belonging to that other or a third personD or to destroy or damage his o$n property in a $ay $hich he no$s is li ely to endanger the life of that other or a third person/

shall be guilty of an offenceAB

*

'ection ,+#

,1

0#! Contravention of these sections carries heavy penalties# 9 person %uilty of arson under section 3" or of an offence under section 3" 6,7 6whether arson or not7 is liable on conviction upon indictment to imprisonment for life> whereas a person %uilty under other sections in the same 5art is liable on conviction upon indictment to imprisonment for ten years# 3 0# In . v Shum Hon Kai 9 Another>+ arson char%es were brou%ht for debt collection activities# The facts concerned a =iss Lau who was the %irlfriend of the second appellant# -urin% the course of their relationship> the second appellant lent M+>""" to =iss LauJs cousin> who did not repay the loan# 9fter the second appellantJs relationship with =iss Lau had ended> he held her responsible for the loan# The second appellant discussed the matter with his friend> the first appellant> and they a%reed to set fire to the entrance of =iss LauJs flat in a multi(storey buildin%# They did so at about 1 am# The first appellant lit the fire while the second appellant acted as loo?out# The first appellant burned himself accidentally and suffered serious burns# Both pleaded %uilty to the char%e of arson but appealed a%ainst the sentence of ei%ht yearsJ imprisonment# The Court of 9ppeal expressed the view that as the de%ree of seriousness in arson cases mi%ht vary considerably> it would be unwise to lay down any sentencin% %uidelines# The court did not doubt the seriousness of the offence committed> but said that miti%atin% circumstances should have been ta?en into consideration# These included the a%e of the first appellant> that he surrendered himself and that he pleaded %uilty# The first appellantJs sentence was reduced to six years# 9s for the second appellant> he was already ,0 years of a%e and did not have a clear record# 9lthou%h he merely acted as the loo?out> no distinction was made between him and the first appellant> and he also received a reduced term of six years#

Thre%ts to kill or mur+er

0#1" 'ection 1* of the 8ffences 9%ainst the 5erson 8rdinance 6Cap ,1,7 stipulates that any person who maliciously sends any letter or writin% threatenin% to ?ill or murder another shall be %uilty of an offence triable upon indictment and shall be liable to imprisonment for ten years#

Theft %n+ ?l%$km%il

0#11 The offence of blac?mail is said to be usually associated with triad activity>! but it is also applicable to debt collection cases# 'ince %oods obtained by blac?mail are to be re%arded as stolen %oods> debt collectors who recover debts by blac?mail may also be convicted of theft# 1"

3 + !

1"

'ection 30# N1 !!O $&C ,+ # = Aindlay> C $owarth and I -obinson> Criminal !a$ in Hong Kong/ Cases and Commentary 6,nd edition7 at pa%e )!0# 6G= AindlayH7 'ection ,3 6)7 of the Theft 8rdinance 6Cap ,1"7# . v !am Chiu Ca N1 3O 1 $&C 0",#

,,

0#1, The offence of blac?mail is provided for in section ,0 of the Theft 8rdinance 6Cap ,1"7: @)5, A person commits blac mail if/ $ith a vie$ to gain for himself or another or $ith intent to cause loss to another/ he ma es any un$arranted demand $ith menacesD and for this purpose a demand $ith menaces is un$arranted unless the person ma ing it does so in the belief " )a, )b, that he has reasonable grounds for ma ing the demandD and that the use of the menaces is a proper means of reinforcing the demandAB

0#10 The elements of the offence are that there must> first> be a demand> which can be expressed or implied# 11 The demand need not be communicated to the victim> and it is not a reFuirement that the victim is threatened or intimidated#1, In . v Tsang :ip (ong>10 for instance> the demand and menaces were communicated to an undercover police officer instead of the intended victim# 9part from a demand> there must be menaces or threats which are such that an ordinary person would be influenced or made apprehensive and therefore willin% to accede to the demand# 1) In . v !ee Keng" $ong>1* for instance> claimin% to be a member of a triad society was held to be an implied menace for the purposes of blac?mail# 0#1) The case of . v !am Chiu Ca13 illustrates the application of the offence of blac?mail to debt collection activities# The defendant invested M,"">""" in a company in 1 ,# By 1 0> the defendant wanted to withdraw from the company and sou%ht the return of his investment in full# 8ther members of the company claimed that because of tradin% losses> he could only have M3">""" bac?# $owever> company accounts were not produced and no money was returned to the defendant# In 9pril 1 )> the defendant went to the companyJs premises to%ether with five men to demand repayment# The defendant remained for most of the time at the door of the office whilst the men entered and made demands for the return of M,"">"""> usin% threats and minor assaults# 9s a result> two of the partners of the company drew several cheFues in favour of the defendant# 8ne cheFue was for M1">"""> representin% the a%%re%ate balance in the company account# Aour other cheFues> each for M*">"""> were drawn# The men directed the two partners to obtain loans from friends and relatives> which the partners did to the extent of M1"">"""# The defendant cashed three cheFues from the ban?# Before leavin% the company premises> the men obtained I8<s from the two partners for the remainder of the demand> and warned that the sum must be repaid within a month or they would be physically assaulted# The defendant was convicted of blac?mail pursuant to section ,0 of the Theft
11 1, 10 1) 1* 13

= Aindlay> cited above> at pa%e )!0# 9s above# N1 0O 1 $&C 0"!# = Aindlay> cited above> at pa%e )!0# Criminal 9ppeal .o# 1!, of 1 ,# N1 3O 1 $&C 0",#

,0

8rdinance 6Cap ,1"7# The defendant was also convicted of theft pursuant to section ,36)7 of the Theft 8rdinance which provides that %oods obtained by blac?mail shall be re%arded as stolen# The defendant was sentenced for ei%ht months# The defendant relied on . v S ivington1+ and appealed on the %round that he honestly believed that he had a /ust claim to the money> and could not be convicted of theft simply because the means of obtainin% the money were improper# The appeal was dismissed because> first> . v S ivington has been superseded by section ,36)7 of the Theft 8rdinance 6Cap ,1"7D and second> a defence of claim of ri%ht> which allows a defendant to sei:e or reclaim property over which he honestly believes he has ri%hts> did not avail the defendant#

*ss%ult
0#1* 4arious offences relatin% to assaults are provided for in the 8ffences 9%ainst the 5erson 8rdinance 6Cap ,1,7# 9ssault is an act by which the defendant intentionally or rec?lessly causes a person to apprehend immediate and unlawful physical violenceD and if physical violence does occur> it amounts also to the offence of battery# 1! Even words may constitute an assault#1 Relevant sections of the 8ffences 9%ainst the 5erson 8rdinance 6Cap ,1,7 are set out: CD;. ... woun+ing ... with intent to +o grievous ?o+il& h%rm. Any person $ho 4 )a, unla$fully and maliciously/ by any means $hatsoever/ $ounds or causes any grievous bodily harm to any personD AAA )b, AAA )c, AAA $ith intent in any of such cases to maim/ disfigure/ or disable any person/ or to do some other grievous bodily harm to any person/ or $ith intent to resist or prevent the la$ful apprehension or detain of any person/ shall be guilty of an offence triable upon indictment/ and shall be liable to imprisonment for lifeA D5. 7oun+ing or infli$ting grievous ?o+il& h%rm

Any person $ho unla$fully and maliciously $ounds or inflicts any grievous bodily harm upon any other person/ either $ith or $ithout any $eapon or instrument/ shall be guilty of an offence triable upon indictment/ and shall be liable to imprisonment for F yearsA

1+ 1! 1

61 3+7 *1 Cr 9pp R 13+# = Aindlay> cited above> at pa%e 0+!# 'ee the $ouse of Lords decision in . v 'reland 9 3ursto$ N1 'teyn at 13,#

!O 9C 1)+> per Lord

,)

45.

*ss%ult o$$%sioning %$tu%l ?o+il& h%rm

Any person $ho is convicted of an assault occasioning actual bodily harm shall be guilty of an offence triable upon indictment and shall be liable to imprisonment for F yearsA :3. (ommon *ss%ult

Any person $ho is convicted of a common assault shall be guilty of an offence triable either summarily or upon inducement/ and shall be liable to imprisonment for 5 yearAB

Mens re% for %ss%ult

0#13 9s for the reFuired intention to cause %rievous bodily harm under section 1+> re%ard must be had to the weapon> if any> used and the manner in which it was used# 'tri?in% with the fists per se is not sufficient evidence of an intent to cause %rievous bodily harm> even thou%h this may in fact result#," 9n intention to fri%hten is insufficient> and so is rec?lessness as to whether %rievous bodily harm will result# ,1 1here several defendants participate in a %an% attac?> as in The Attorney <eneral v Sin 8ai !un/ ,, no distinction would normally be drawn between those who actually use violence and those who are in the vicinity ready to perform other tas?s# 9ll would be eFually %uilty because without each playin% his full part> the crime would be less li?ely to be perpetrated# 0#1+ 1ith re%ard to the mens rea reFuired under sections 1 and 0 of the 8ffences 9%ainst the 5erson 8rdinance 6Cap ,1,7> it was held in the $ouse of Lords in . v Savage and . v Parmenter,0 that for unlawful and malicious woundin% or inflictin% %rievous bodily harm> ,) the prosecution must prove that the defendant either intended or actually foresaw that his act would cause harm# It is not sufficient to show merely that he ou%ht to have foreseen that his act would cause harm# It is unnecessary for the prosecution to show that the accused intended or foresaw that his unlawful act mi%ht cause physical harm of the %ravity described in the section> that is> either woundin% or %rievous bodily harm# 9s for assault occasionin% actual bodily harm> ,* the prosecution has to prove that the defendant committed an assault and that actual bodily harm was occasioned by the assault# There is no need to prove that the defendant intended to cause some bodily harm or was rec?less as to whether such harm would be caused# The $ouse of Lords also held that a verdict of assault occasionin% actual bodily harm under section )+ is a permissible alternative verdict on a count alle%in% unlawful woundin% under section ," of the 8ffences 9%ainst the 5erson 9ct 1!31#

," ,1 ,, ,0 ,) ,*

Halsbury2s Statutes 4ol 1, at pa%e !# 9s above# N1 !!O $&C )01# N1 1O ) 9ll ER 3 !# 'ection ," of the 8ffences 9%ainst the 5erson 9ct 1!31# Its wordin% is similar to section 1 of the 8ffences 9%ainst the 5erson 8rdinance 6Cap ,1,7# 'ection )+ of the 8ffences 9%ainst the 5erson 9ct 1!31# Its wordin% is similar to section 0 of the 8ffences 9%ainst the 5erson 8rdinance 6Cap ,1,7#

,*

0#1! 9ssaults in connection with debt collection activities have received /udicial consideration# In . v Chan :au Hang and Another >,3 in which the victim was beaten and burnt with ci%arettes> the Court of 9ppeal pointed out that: @8e agreed $ith the vie$ of the trial %udge that there is a public interest in deterring those $ho might see to collect debts by these appalling methodsAB,+ 0#1 9nother example is . v Choi 8ai K$ongA ,! The defendant was the victimJs sub(contractor who was owed M01">""" under the sub(contract# 9mon%st other attempts at recoverin% the debt> the defendant and three other men went to the victimJs office to ma?e demands for repayment# 1hen the victim refused to pay> the men be%an to assault him# It was alle%ed by the victim that he was hit with a hammer# =edical reports showed only relatively minor in/uries# The defendant was convicted by the ma%istrate of assault occasionin% actual bodily harm# 8n appeal by the defendant> the appeal was allowed in part> and a conviction of common assault was entered in substitution for assault occasionin% actual bodily harm# 1hether the bodily harm inflicted amounted to Kactual bodily harmJ was a Fuestion of de%ree> and actual bodily harm meant a harm that was more than triflin%# Transitory pain was not enou%h# 9 cut> or an area of burnin%> was actual bodily harm unless it was very minor#

1%lse imprisonment
0#," 9part from bein% a tort> false imprisonment is also a common law offence that is sometimes relevant to debt collection activities# Aalse imprisonment is committed where a defendant unlawfully and intentionally or

,3

,+ ,!

N1 !0O 1 $&C 1"+# The victim incurred a heavy %amblin% debt in =acau which> to%ether with interest> amounted to M13*>"""# 1hen the victim failed to effect repayment as scheduled> he was sei:ed by a number of men in &owloon and beaten> as a result of which he sustained a blac?(eye# The victim was then ta?en to a room where he was burnt with a ci%arette> leavin% five burn mar?s on his body> one of which penetrated all layers of the s?in> althou%h the others only penetrated the first layer of the epidermis# The defendants were convicted in the -istrict Court on two char%es of assault occasionin% actual bodily harm> and one char%e of false imprisonmentLforcible detention under section ), of the 8ffences 9%ainst the 5erson 8rdinance 6Cap ,1,7# The defendants were acFuitted of the latter char%e on appeal because the -istrict Court did not have /urisdiction to try any offence punishable with life imprisonment> sub/ect to a few specific exceptions# In relation to the first assault char%e in respect of which they received a term of imprisonment of 1! months> the Court of 9ppeal dismissed the appeal and said : G$ad the first assault been an isolated matter> without any bac?%round> such as there was to this case> a term of imprisonment of 1! months would have been a very severe one for two men who> for practical purposes> were without previous convictions# $owever> it is necessary> when determinin% the correct sentence> to ta?e into account the fact that this was part of a course of conduct which was desi%ned to terrify a debtor and to force him under threat of assault> and under actual assault and ill(treatment> to repay the loan which had been made to him#
5er Roberts CJ> at pa%e 11"# N1 ! O , $&LR 01#

,3

rec?lessly restrains anotherJs freedom of movement from a particular place# , There is little authority on the nature of the mens rea reFuired> but it is believed that Cunningham rec?lessness0" is reFuired#01 0#,1 To establish false imprisonment> the case of . v Cheung 8an 'ng decided that: @8here there has been no physical restraint placed upon a person2s movements/ a court must/ at the very least/ need cogent evidence of some real danger threatened by the culprit and feared by the victim in e=ercising freedom of movement before finding the offence of false imprisonment has been establishedAB0, 0#,, This reFuirement was overruled in . v Chan 8ing Kuen and Another00 by the Court of 9ppeal# The case concerned a victim who incurred a %amblin% debt in =acau and was accompanied bac? to $on% &on% by the first defendant in order to collect the debt# 9t the $on% &on% =acau Terminal> they were met by the second defendant and two other men# The victim was told to board a taxi and was ta?en to Chai 1an where> after he had made some unsuccessful calls to raise money> he was ta?en to a ?arao?e bar and ?ept there until ) am the followin% mornin%> while more unsuccessful calls were made# The four men then rented two rooms at a hotel in Chai 1an which they and the victim occupied for several hours# The first defendant was arrested when he was accompanyin% the victim to meet a friend of the victim to collect some money# The second defendant was arrested some time later# The defendants were convicted of false imprisonment and appealed on the %round that> if the victim had remained with the defendants because he felt he had a moral obli%ation to repay the debt> it was impossible to say that he had been falsely imprisoned# The appeal was dismissed# The Court of 9ppeal held: @(or the offence to be committed it is not necessary that there be evidence that the defendant or defendants uttered a threat to the victim that he $as in Esome real danger2 or indeed that any threat $as utteredAB0) 9ccordin%ly> . v Cheung 8an 'ng was overruled as bein% contrary to the rulin% on false imprisonment in . v .ahman>0* which was cited with approval in . v HutchinsA03

1or$i?le +etention
0#,0
, 0" 01

The common law offence of false imprisonment has some

. v .ahman 61 !*7 !1 Cr 9pp Rep 0) > at 0*0# 'mith @ $o%an> Criminal !a$ 6!th edition7 at pa%e )*)# @3roadly/ the distinction is that Cunningham rec lessness requires proof that the defendant $as a$are of the e=istence of the unreasonable ris $hereas Cald$ell0!a$rence rec lessness is satisfied if either )i, he $as a$are of its e=istence/ or )ii, in the case of an obvious ris he failed to give any thought to the possibility of its e=istenceA Some offences require proof of Cunningham rec lessnessA &thers are satisfied by proof of Cald$ell0!a$rence rec lessnessAB 'mith @ $o%an> cited above> at pa%e 3)# . v Cheung 8an 'ng N1 "O 1 $&LR 3**# N1 *O 1 $&C )+"# 9s above> at pa%e )++# 61 !*7 !1 Cr 9pp Rep 0) # N1 !!O Crim LR 0+ #

0, 00 0) 0* 03

,+

overlap with section ), of the 8ffences 9%ainst The 5erson 8rdinance 6Cap ,1,7 on forcible detention> which reads: @Any person $ho/ by force or fraud/ ta es a$ay or detains against his or her $ill any man/ boy/ $oman or female child/ $ith intent to sell him or her/ or to procure a ransom or benefit for his or her liberation/ shall be guilty of an offence triable upon indictment/ and shall be liable to imprisonment for lifeAB 0#,) 'ection ), of the 8ffences 9%ainst the 5erson 8rdinance 6Cap ,1,7 is similar to section *3 of the <nited &in%dom 8ffences 9%ainst the 5erson 9ct 1!31 which has been repealed# There is one reported decision 0+ in the <nited &in%dom of a case relatin% to the latter section> which involved a father ta?in% away his child# 0#,* The $on% &on% Court of 9ppeal decision in . v Chan :au Hang 0! and Another illustrates the overlap between the common law offence of false imprisonment and section ), of the 8ffences 9%ainst the 5erson 8rdinance 6Cap ,1,7# -ebt collectors forced a debtor to repay a %amblin% debt by detainin% the debtor in a room and assaultin% him# The debt collectors were convicted of false imprisonment in the -istrict Court> but the false imprisonment char%e was drafted in such a way that elements of both false imprisonment and section ), forcible detention were included in the char%e# The defendants appealed a%ainst conviction on the %rounds that> first> the particulars of the char%e did not satisfy either the common law or statutory offenceD and> second> the -istrict Court did not have /urisdiction to try the offence under section ),# The appeal a%ainst the false imprisonment conviction was allowed# The char%e as drafted was: @(alse imprisonment/ contrary to common la$ and section G* of the &ffences Against The Person &rdinance )Cap *5*,A Particulars of offenceH Chan :au"hang/ Ho !ai"man and Hoi Su" un/ on or bet$een 5+ &ctober 5-+* and *7 &ctober 5-+*/ in this colony/ together $ith other persons un no$n/ by force/ detained Tong King"yiu against his $illAB The char%e was mis(described as false imprisonment because the defendants were actually char%ed with two offences# 9lso> althou%h it is usual in char%in% the common law offence of false imprisonment to assert that the victim was unlawfully and in/uriously imprisoned and detained a%ainst his will> on closer examination it is apparent that such particulars were inappropriate to either offence# Aurthermore> the Court of 9ppeal found that the -istrict Court did not have /urisdiction to try any offence which was punishable with life imprisonment> with the exception of a number of specific offences which did not include section ),#0
0+ 0! 0

. v Austin N1 !1O 1 9ll ER 0+)# N1 !0O 1 $&C 1"+# This latter point was further explained in . v 8ong K$o !un N1 !)O $&C *"# The Court of 9ppeal mentioned that because of a lacuna in the law> there was no /urisdiction in the -istrict Court to try this offence# This came about when> in 1 !,> the previous maximum term

,!

Tri%+ offen$es
0#,3 'ome debt(collectors claim that they are triad members durin% the debt collection process# 9s a result> they may also be %uilty of offences under the 'ocieties 8rdinance 6Cap 1*17# <nder section ,"6,7 of the 'ocieties 8rdinance 6Cap 1*17: @Any person $ho is or acts as a member of a triad society or professes or claims to be a member of a triad society AAA shall be guilty of an offence and shall be liable on conviction on indictment " )a, )b, in the case of a first conviction for that offence to a fine of I577/777 and to imprisonment for F yearsD and in the case of a second or subsequent conviction for that offence to a fine of I*J7/777 and to imprisonment for 6 yearsAB

0#,+ 9part from section ,"> the more serious offence under section 1 would be applicable to office(bearers of triad societies# 'ection 1 6,7 of the 'ocieties 8rdinance 6Cap 1*17 reads: @Any office"bearer or any person professing or claiming to be an office"bearer and any person managing or assisting in the management of any triad society shall be guilty of an offence and shall be liable on conviction on indictment to a fine of I5/777/777 and to imprisonment for 5J yearsAB 0#,! The term Koffice(bearerJ is defined> in relation to triad societies> as any person holdin% any ran? or office other than that of any ordinary member#)" In triad societies> a hierarchy of authority and control exists whereby senior office(bearers direct the activities of lesser members> and the heavier penalties under section 1 reflects the increased culpability of those who are in control# 0#, 1hether a defendant has /oined a triad society is a Fuestion of fact> and a Gbald admissionH)1 may in some unusual circumstances be re%arded as sufficient evidence that an offence under section ,"6,7 has been committed> thou%h in most cases Gproof of other facts to indicate membership>

)" )1

of 1) yearsJ imprisonment was altered by the le%islature to one of life imprisonment# 5ursuant to section !! of the =a%istrates 8rdinance 6Cap ,,+7> and 5t III of the 'econd 'chedule> the 'ecretary for Justice may apply to transfer to the -istrict Court for trial of offences listed therein which carry a sentence of life imprisonment# The schedule has not been amended to permit section ), offence to be so transferred and tried# 'ocieties 8rdinance 6Cap 1*17 section ,# @3y a Ebald admission2 $e ta e to be meant a statement such as E' am a member of such and such a society2 and no more/ $hich $e assume that the magistrate $ould re%ect as being a matter of mere hearsay or beliefAB Per Cons C"P in A< v Chi 8ai"lun N1 !+O $&LR )1#

whether by way of admission by the defendant or otherwiseH> ), would be reFuired#

Summ%r& Offen$es Or+in%n$e '(%p 229)

0#0" Criminal offences which may be applicable to some abusive debt collection activities can also be found in the 'ummary 8ffences 8rdinance 6Cap ,,!7# 0#01 that: 'ection )6,,7 of the 'ummary 8ffences 8rdinance provides @1uisances and miscellaneous offences GA Any person $ho $ithout la$ful authority or e=cuse 4 K )**, disturbs any inhabitant by pulling or ringing any door bell/ or by noc ing or stri ing at any door $ithout la$ful e=cuseD K

shall be liable to a fine of IJ77 or to imprisonment for F monthsBD 0#0, 'ection ! of the 'ummary 8ffences 8rdinance provides that: @&ther offences against good order Any person $ho 4 )a, K )b, $ithout the consent of the o$ner or occupier $rites upon/ soils/ defaces or mar s any building/ $all/ fence or paling $ith chal or paint or in any other $ay $hatsoeverD or $ilfully brea s/ destroys or damages any part of any building/ $all/ fence or paling/ or any fi=ture or appendage thereofD )c, K shall be liable to a fine of IJ77 or to imprisonment for F monthsAB 0#00 that: 9lso> section ," of the 'ummary 8ffences 8rdinance stipulates @Any person $ho " )a, sends any message by telegraph/ telephone/ $ireless telegraphy or $ireless telephony $hich is grossly offensive or of an indecent/ obscene or menacing
A< v Chi 8ai"lun N1 !+O $&LR )1 per Cons 45#

),

0"

)b,

)c,

characterD or sends by any such means any message/ $hich he no$s to be false/ for the purpose of causing annoyance/ inconvenience or needless an=iety to any other personD or persistently ma es telephone calls $ithout reasonable cause and for any such purpose as aforesaid/

shall be liable to a fine of I5/777 and to imprisonment for * monthsAB 0#0) It should be noted that the above offences are not specifically desi%ned to tac?le abusive debt collection> and will not be able to cover the whole ran%e of the relatively KminorJ improper collection tactics which are presently employed or are li?ely to be developed#

#ost Offi$e Or+in%n$e '(%p 59)

0#0* By virtue of section 0,6176f7 of the 8rdinance> a person who sends by post Gany obscene> immoral> indecent> offensive or libellous writin%> picture or other thin%H is %uilty of an offence punishable by a fine of M,">""" and imprisonment for 3 months#

Cr%/%&al +a&*t%o&+ 'or "art%*%"at%o&

The prin$ip%l
0#03 9busive debt collection activities are often carried out by more than one person# 1here there are several participants in a crime> the principal is the one whose act is the most immediate cause of the actus reus#)0 It is possible to have two or more principals in the first de%ree to the same crime# $ence> if two debt collectors both a%ree to attac? and do attac? a victim to pressure the victim into repayin% a loan> then both are %uilty of assault as /oint principals#

Se$on+%r& p%rti$ip%tion
0#0+ In other cases> where there is participatory conduct by one person> another may have to bear or share criminal responsibility under section ! of the Criminal 5rocedure 8rdinance 6Cap ,,17# This states that any person who Gaids> abets> counsels or procures the commission by another person of any offence shall be %uilty of the li?e offenceH# The mental state reFuired for aidin% and abettin% involves actual ?nowled%e of> or wilful blindness towards> the circumstances which constitute the offence> which is not the same as the mens rea reFuired of the principal party# )) &nowled%e of the offence is sufficient if the offence committed is of the type contemplated
)0 ))

= Aindlay> cited above> at pa%e 0 # 9s above> at pa%e )"# 'ee also 'mith @ $o%an> !th edition> at pa%es 1)" and 1)1#

01

by the secondary party> and ?nowled%e does not have to be complete in detail#)* There is a lar%e body of case law on this area of law and application of the principles is not free from difficulty# 9pplied to debt collection cases> a creditor or other party may be liable in various situations# 0#0! Intention to aid ; 9s lon% as it is proved that a person intended to do the acts which he ?new to be capable of assistin% or encoura%in% the commission of the crime> it is not necessary to prove his intention that the crime be committed#)3 Therefore> a creditor or other person who ?new that the debt collectors would employ ille%al means to collect debts> and either drove the debt collectors to commit the crime or provide weapons and tools to the debt collectors> that person may be liable as a secondary party# 0#0 Common purpose ; 9 secondary party will be liable for the acts of the principal party if the principal party has in the course of endeavourin% to carry out the common purpose committed another crime# )+ $ence> if the creditor and the debt collector have the common purpose to cause %rievous bodily harm to the debtor> and the debt collector> endeavourin% to do so> ?ills the debtor> both the creditor and debt collector are %uilty of murder# 0#)" Transferred malice ; If a secondary party has a common purpose with the principal party to in/ure 9> and the principal party> endeavourin% to in/ure 9> wounds B accidentally> then both the secondary party and the principal party are liable for woundin% under the doctrine of transferred malice#)! 0#)1 5articipation by inactivity ; 1here one person has the ri%ht to control the actions of another and he deliberately refrains from exercisin% it> his inactivity may be a positive encoura%ement to the other to perform an ille%al act> and> therefore> an aidin% and abettin%# ) $ence> if a creditor hires some debt collectors to collect debt> and the creditor /ust stands by and watches while the debtor is bein% beaten up> the creditor may be liable for assault as a secondary party#

D%*ar%ou+ l%a)%l%ty
0#), In some limited circumstances> the law holds a defendant criminally responsible even where there is no direct actus reus committed or mens rea possessed by him#*" 4icarious criminal liability is imposed in two ways# Airst> a person under certain statutory duties may be held liable for the

)* )3

)+ )!

) *"

. v 3ainbridge N1 3"O 1 PB 1, # 'ee also 'mith @ $o%an> !th edition at pa%e 1),# 'mith @ $o%an> !th edition> at pa%e 10+# 'ee !ynch v DPP for 1orthern 'reland N1 +*O 9C 3*0> where -, drove -1 to the place where he ?new that -1 intended to murder a policeman# -, was convicted of aidin% and abettin%# 'mith @ $o%an> cited above> at pa%e 1),# 9s above# 'ee> however> the old and famous case of Saunders v Archer 61*+07 , 5lowd )+0> where there was a deliberate> and not an accidental> departure from the a%reed plan# 'mith @ $o%an> cited above> at pa%e 103# = Aindlay> cited above> at pa%e +3#

0,

acts of another*1 if he has dele%ated to that other person the performance of the statutory duty# 'econd> an employer may be held vicariously liable because acts done physically by his employee may> in law> be treated as the employerJs act# <nli?e the law of tort> an employer is not %enerally liable for the acts of the employee performed in the course of employment under the criminal law# 9n employer may> however> be held vicariously liable for the criminal acts of an employee under the Gdele%ationH principle# In Allen v 8hitehead>*, the act of the employee and his mens rea were both imputed to his employer> not simply because he was an employee> but because the mana%ement of the business had been dele%ated to him# *0 The rationale seems to be that the employer is responsible for appointin% the employee and ensurin% that no criminal offences are committed by the employee within the course of employment# If this were not the case> employers could easily avoid prosecution by deliberately avoidin% personal ?nowled%e of ille%al activities#*) 0#)0 There is thus a real possibility that a debt(collectorJs employer may be held vicariously liable for the ille%al acts of the debt(collector if the debt(collector is %iven full conduct of the debt collection wor? and decisions are dele%ated to the employee#

Cor"orat! l%a)%l%ty
0#)) Corporate liability stems from the le%al principle that a corporation is a le%al person# 9 corporation acts throu%h its controllin% officers whose acts and states of mind are imputed to the corporation whenever they are actin% in their capacity as controllin% officers# ** Therefore> corporations may be liable for an offence which reFuires mens rea# There are certain limitations on corporate liability> the ma/or one bein% that a corporation can only be convicted of offences which are punishable with a fine# It has been held that a corporation may not be indicted for manslau%hter or an offence involvin% personal violence# *3 This was doubted in 'C. Haulage !td>*+ where 'table J thou%ht that Gif the matter came before the court today> the result mi%ht well be differentH# The point has now been clarified in P 9 & #uropean (erries !td>*! which held that an indictment for manslau%hter would lie a%ainst a company#

*1

*, *0 *) ** *3 *+ *!

The other person may or may not be the employee# In !innett v Metroplitan Police Commissioner N1 )3O &B , "> one of two co(licensees was held liable for the acts of the other in ?nowin%ly permittin% disorderly conduct in licensed premises# N1 0"O 1 &B ,11# 'mith @ $o%an> cited above/ at pa%e 1++# = Aindlay> cited above> at pa%e ++# 9s above> at pa%e !!# 'ee also Meridian <lobal (unds Management Asia !tdA v Securities Commission> N1 *O , 9C *"" 5C# Cory 3ros !td N1 ,+O 1 &B !1"# N1 ))O &B **1# 61 "7 0 Cr 9pp Rep +,# 9lso N1 1O Crim LR 3 *#

00

C#a"t!r 5 E0%+t%&$ *%4%l r!/!(%!+ 'or a)u+%4! (!)t *oll!*t%o&

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

C%4%l r!/!(%!+ 'or a)u+%4! (!)t *oll!*t%o&

)#1 If any person is wron%ed by abusive debt collection activities> that person may brin% civil proceedin%s see?in% civil remedies> which are li?ely to include dama%es and in/unctive relief# If a person suffers any personal in/ury 6includin% physical or psycholo%ical in/ury7> pecuniary loss> or dama%e to property> that person has the ri%ht to claim compensation which would put him in the same position as he would have been in> if he had not been wron%ed# The in/ured person may also apply to court for an in/unction restrainin% the commission or continuance of the wron%ful act# 9n in/unction> however> cannot be demanded as of ri%ht> and one will not> in %eneral> be %ranted where dama%es would be a sufficient remedy# Civil claims may be brou%ht under numerous heads> and those often applicable to debt collection activities are described below#

Tresp%ss to the person

)#, The tort of trespass to the person includes assault> battery and false imprisonment# This tort has its counterpart in the criminal law# In many situations involvin% this tort> the claimant has the choice of see?in% redress in tort> or under the criminal law or both# )#0 The direct and intentional application of unwanted physical contact on another person may constitute the tort of battery# 1 There is no reFuirement to prove that the physical contact caused or threatened any physical in/ury or harm# Examples of battery from some old cases include touchin% another in a rude and offensive manner> , spittin% in anotherJs face>0 throwin% water upon somebody>) or pullin% a chair from under another whereby that person falls to the %round# * )#) 9s for assault> it is an overt act indicatin% an immediate intention to commit a battery> coupled with the capacity of carryin% that intention into effect#3 In other words> an assault is an act causin% reasonable apprehension
1 , 0 ) * 3

Cler? @ Lindsell> Torts/ 1+th edition at 1,("*# Cole v Turner 61+")7 3 =od 1) # . v Cotes$orth 61+")7 3 =od 1+,# Pursell v Horn 61!0!7 ! 9 @ E 3",# Hopper v .eeve 61!1+7 + Taunt 3 !# Cler? @ Lindsell> cited above> at 1,(1,#

0)

of a battery# Blac?stone defined assault as @an attempt or offer to beat another/ $ithout touching H as if one lifts up his cane/ or his fist/ in a threatening manner at anotherD or stri es at him but misses himBA + 'almond and $euston too? the view that words alone probably did not constitute an assault because the intent to do violence must be expressed in threatenin% acts#! $owever> Clanville 1illiams believed that @a verbal threat of immediate force has all the essential elements of an assault/ particularly $here it is uttered $ith the intention of imposing a present restraint upon the conduct of the victimA There is nothing in the #nglish decisions contrary to this vie$BA This view now has the support of the $ouse of Lords# 1" Threats may amount to assault not only when the plaintiff and the defendant are face to face> but also over the telephone#11 In 8ong K$ai (un v !i (ung>1, a debt collection case> the defendant uttered threats of physical violence and death on various occasions includin% in the presence of the plaintiff and his family> on the telephone and the intercom system# The defendant had struc? the plaintiff and members of his family on previous occasions# The court held that the threats constituted actionable wron%s and amounted to assault# It is believed that the emphasis on acts rather than words reflects the conditions of earlier times when means of communication were more restrictive# 10

1%lse imprisonment
)#* G9 false imprisonment is complete deprivation of liberty for any time> however short> without lawful causeH# 1) It appears that neither the use of force nor any direct physical contact is necessary to constitute false imprisonment> and neither is the plaintiffJs present ?nowled%e of the confinement# 1ell ?nown dicta support this view: @'t appears to me that a person could be imprisoned $ithout his no$ing itA ' thin a person can be imprisoned $hile he is asleep/ $hile he is in a state of drun enness/ $hile he is unconscious/ and $hile he is a lunatic AAAA &f course/ the damages might be diminished and $ould be affected by the question $hether he $as conscious of it or notAB 1* )#3 These dicta were approved obiter by the $ouse of Lords in Murray v Ministry of Defence 13 and by the $i%h Court of $on% &on% in Attorney <eneral v Chan :uen !ung#1+ )#+ The action for false imprisonment allows redress to victims of unlawful incarceration#1! It is in line with the importance attached to the individualJs freedom of the person and movement as %uaranteed under the Bill of Ri%hts
+ !

1" 11 1, 10 1) 1* 13 1+

Bl Com iii> 1,"# 'almond @ $euston> !a$ of Torts> 6,"th edition7 at pa%e 1,+# Clanville 1illiams> Assault and 8ords> 61 *+7 Criminal L Rev ,1 > ,,)# . v 'reland 9 3ursto$> N1 !O 9C 1)+> per Lord 'teyn at 13,# 3arton v Armstrong N1 3 O , .'1R )*1# N1 )O 1 $&C *) # - & 'rivastava @ 9 - Tenne?one> The !a$ of Tort in Hong Kong> 1 * at pa%e *3# Cler? @ Lindsell> cited above> at 1,(1+# Meering v <rahame"8hite Aviation Co 61 1 7 1,, LT )) per 9t?in LJ# N1 !!O 1 1LR 3 ,# 6<nreported7 $C Crim 9pp ,," of 1 ! # Cited by - & 'rivastava> cited above> at pa%e 30# Alemin%> The !a$ of Torts> 6!th edition 1 ,7> at pa%e ,+#

1!

0*

8rdinance 6Cap 0!07#1

6eme+ies for %ss%ult, ?%tter& %n+ f%lse imprisonment

)#! Aor assault and battery> if no actual in/ury has been caused> only nominal dama%es can be awarded# If some actual physical in/ury has been caused> dama%es will be assessed in accordance with law# If a plaintiff has suffered humiliation and ridicule caused by the defendantJs intentional act or conduct> a%%ravated dama%es may be awarded in addition to dama%es for the actual in/ury#," 9ssessin% dama%es may be problematic since Fuantum is not as easily determinable as for personal in/ury and dama%e to property# In 8illiam Alan Terence Cra$ley v the Attorney <eneral >,1 for example> thou%h the plaintiff did not suffer any physical in/ury> the manner of his arrest was humiliatin%> and he was awarded $&M)>*"" as dama%es> after ta?in% into account in/ury to his reputation and humiliation# )# 1ith re%ard to false imprisonment> dama%es are %iven to vindicate the plaintiffJs ri%hts even thou%h no pecuniary dama%e has been suffered#,, In exceptional cases> the courts will issue an in/unction to restrain future assaults#

Bntention%l ph&si$%l h%rm other th%n tresp%ss to the person / Bntention%l infli$tion of emotion%l +istress
)#1" The tort of intentional infliction of physical harm other than trespass to the person is illustrated in the case of 8il inson v Do$nton#,0 The tort covers any act or statement of the defendant which is intended to cause physical harm to the plaintiff and which in fact causes illness or in/ury# 1ri%ht J said: @the defendant has K $ilfully done an act calculated to cause physical harm to the plaintiff 4 that is to say/ to infringe her legal right to safety/ and has in fact thereby caused physical harm to herA That proposition $ithout more appears to state a good cause of action/ there being no %ustification alleged for the actAB *G )#11
1

8il inson v Do$nton was applied by the Court of 9ppeal in

9rticle *617 : @#veryone has the right to liberty and security of personA 1o one shall be sub%ected to arbitrary arrest or detentionA 1o one shall be deprived of his liberty e=cept on such grounds and in accordance $ith such procedure as are established by la$AB 9rticle *6*7: @Anyone $ho has been the victim of unla$ful arrest or detention shall have an enforceable right to compensationAB .oo es v 3arnard N1 3)O 9C 11, # N1 !+O $&LR 0+ # Cler? @ Lindsell> cited above> at 1,(!"# N1! +O , PB *+# The case involved a practical /o?e in which the defendant falsely informed a woman that her husband was badly in/ured in a traffic accident# The woman suffered serious nervous shoc? which affected her for wee?s# It was held that the defendant was liable on the %round that where a person ma?es a false statement which is intended to be acted on> he must ma?e %ood dama%e naturally resultin% from its bein% acted on# 9n ob/ective test is applied to determine the defendantJs intention# 9t *!(* #

," ,1 ,, ,0

,)

03

?anvier v S$eeney#,* This case involved private detectives see?in% letters from the plaintiff falsely accusin% her of bein% in correspondence with a Cerman spy# The plaintiff suffered severe nervous illness> and the defendants were held liable even thou%h they could not have foreseen the illness and had no motive to cause that illness# The decision was based on the fact that the defendants had intentionally conducted themselves in such manner as to terrify and fri%hten the plaintiff and they would be presumed to have intended the natural conseFuences of their conduct# )#1, In 3urnett v <eorge>,3 the plaintiff was relentlessly harassed by a former boyfriend# It was held that an in/unction to restrain harassment by telephone calls should only be %ranted if there was evidence that the health of the plaintiff was bein% impaired by molestation or interference calculated to cause such impairment# In the more recent case of Khorasandi%an v 3ush>,+ the Court of 9ppeal held that harassment not amountin% to a threat but causin% or li?ely to cause physical or psychiatric illness to the victim could be restrained quia timet by in/unction# )#10 =ere shoc?> fear or mental sufferin% is not enou%hD some outward and physical result of that emotion> for example> illness resultin% from nervous shoc? is reFuired#,! In the 9ustralian case of 3radley v 8ingnut (irms !td>, the plaintiffs sou%ht an in/unction to restrain the publication of a film> which was described as a Gcomedy horrorH and which showed the tombstone mar?in% the plaintiffJs family burial plot# The plaintiffs alle%ed that they were Gshoc?ed and upsetH by the tombstoneJs association with the film> especially %iven the filmJs extreme and sometimes offensive nature# The court held that a cause of action for intentional infliction of emotional distress reFuired a plaintiff to establish somethin% more than a transient reaction of emotional distress> however initially severe# That reaction must translate into somethin% physical> and the plaintiff had to show that the defendant had wilfully done an act calculated to cause physical harm to the plaintiff and to show that the shoc? and illness were natural conseFuences of the wron%ful act or default# )#1) In Alcoc v Chief Constable of South :or shire Police >0" which concerned a claim for ne%li%ence> the $ouse of Lords stated that in order to establish a claim in respect of psychiatric illness resultin% from shoc?> somethin% more than purely mental distress is reFuired# )#1*
,* ,3 ,+

In the $on% &on% case of 8ong K$ai (un v !i (ung>01 the plaintiff
N1 1 O , &B 013# N1 ,O 1 A#L#R# *,*# N1 0O PB +,+# In this case> the plaintiff> whose friendship with the defendant had bro?en down> claimed in/unctive relief in respect of her complaints that the defendant had assaulted her> made threats of violence a%ainst her> and pestered her with unwanted phone calls# To the extent that this case developed the tort of private nuisance to protect someone without an interest in the land affected> it was overruled by the $ouse of Lords in Hunter v Canary 8harf !tdA N1 +O , 1LR 3!)# Cler? @ Lindsell> cited above> at 1,(1*# N1 0O 1 .QLR )1*# N1 ,O 1 9C 01"# N1 )O 1 $&C *) #

,! , 0" 01

0+

brou%ht an action for possession of the defendantJs residential premises on the basis of an alle%ed sale and purchase a%reement# The defendant resisted the claim on the %round that the property was put up as security for an unenforceable money lendin% transaction in which the rate of interest amounted to )""I per annum# 8ne of the issues was whether dama%es or exemplary dama%es should be awarded in view of the lenderJs repeated threats of violence to him and his family which caused the defendant to attempt to commit suicide# The defendant felt a stron% sense of %uilt towards his family whom he believed would be ?illed# 9fter writin% a note to the plaintiff reFuestin% him to spare his children> the defendant attempted suicide by swallowin% a whole bottle of about 1"" sleepin% pills mixed with deter%ent and coca cola# 9lthou%h the defendantJs life was saved> he made another attempt at suicide and had to under%o psychiatric treatment from 1 !+ to 1 1# The court applied 8il inson v Do$nton and ?anvier S$eeney> and held that dama%es were payable since the reFuirements of the tort were met : the threats of violence by the plaintiff and his a%ents or servants were calculated to be believed by the defendant who had a reasonable basis to believe that the threats would be carried out> and the defendant did suffer fear and depression as a result# 1ith re%ard to the Fuestion of whether exemplary dama%es should be awarded> the court found that the plaintiff> with a cynical disre%ard for the defendantJs ri%hts> had calculated that the excessive interest to be made out of his wron%doin% would probably exceed the dama%es at ris?> which interest the plaintiff ?new to be unenforceable and ille%al# The court also found that> alternatively> the plaintiff sou%ht to %ain at the expense of the defendant his residential property> which the plaintiff coveted> and which he could not obtain or could not obtain except at a price %reater than he was prepared to pay# The court applied .oo es v 3arnard>0, and held that it was an apt case for exemplary dama%es to be awarded so that the plaintiff and people li?e him would be apprised of the policy and attitude of the court in dealin% with such torts#

Tresp%ss to $h%ttels
)#13 If a debt collector dispossesses the plaintiff of his chattel or dama%es it> he may be liable for trespass to chattels# The act of the defendant must be intentional> and there is no liability for accidental acts# 00 8n the other hand> the defendant may still be liable even he does not appreciate that his interference is wron%ful# If a defendant uses a chattel> erroneously believin% that it is his> his act would still constitute trespass to chattels#0) )#1+ If a plaintiffJs %oods are destroyed or disposed of by the defendant> the plaintiff is entitled to recover the full value of the %oods# 0* Aull value is mar?et price or the cost of replacement# 03 If a plaintiffJs %oods are merely dama%ed but not destroyed> the normal measure of dama%es is the
0, 00 0) 0* 03

N1 3)O 9C 11, # 1ational Coal 3oard v #vans )?#, 9 Co N1 *1O , &B !31# Cler? @ Lindsell> cited above> at 10(131# Cler? @ Lindsell> cited above> at 10(131# 8ilson v !omban / N1 30O 1 1LR 1, )A Hall v 3arclay N1 0+O 0 9LL ER 3,"#

0!

amount by which their value is diminished# 0+ ConseFuential loss which is suffered by the plaintiff is also recoverable provided that the loss is not too remote#0! In !iesbosch Dredger v The #dison>0 the plaintiff recovered for loss of profits of a profit(earnin% chattel# In The Mediana v The Comet >)" the plaintiff recovered dama%es for loss of use of the chattels#

-ef%m%tion
)#1! 9 person is liable for defamation if he communicates to another any matter which is untrue and which lowers or tends to lower a person in the estimation of ri%ht(thin?in% members of society %enerally or which tends to ma?e them shun or avoid that person# )1 -efamation may ta?e one of the two forms ( libel or slander# Libel occurs when the defamatory statement is made in some permanent form> usually in writin% or print# It can also be a paintin% or picture> effi%y> caricature> advertisement or any dispara%in% ob/ect# ), 'lander is defamation communicated in a non(permanent form by spo?en words> or other sounds#)0 )#1 It should be noted that if the contents of a defamatory statement are true 6i#e# if the debtor is in fact indebted to the creditor7 the debt collector has a complete defence> ?nown as /ustification> even if the publication was actuated by spite or malice#))

Eegligen$e
)#," It is also possible that a debt collector or a creditor could be held liable for the tort of ne%li%ence# In 8ong 8ai Hing 9 (ung Siu !ing v Hui 8ei !ee/GJ Le 5ichon J9 held> albeit obiter> that had the debtor pleaded ne%li%ence a%ainst the creditors in that case> the court could have found that the creditor owed the debtor a duty to ta?e reasonable care in selectin% and appointin% a debt collection a%ency to act for her> and that the duty of care had not been properly dischar%ed# In determinin% the existence of a notional duty of care> the threefold test of foreseeability of dama%e> proximity and fairness had to be applied# Le 5ichon J9 found that the notional duty of care could easily have been established %iven the fine line between le%itimate and ille%itimate means of recoverin% debts> the fact that the ma/ority of collection a%encies in $on% &on% are poorly mana%ed and unscrupulous> the notoriety of the ille%al means the more unscrupulous a%encies resort to> coupled with the financial inducement to the collection a%ency to produce results# )3 $owever> Ro%ers 4(
0+ 0! 0 )" )1 ), )0 )) )* )3

Cler? @ Lindsell> cited above> at 10(13,# 9s above# N1 00O 9C )) # N1 ""O 9C 110# Cler? @ Lindsell> cited above> at ,1("1 and ,1(1,# 9s above/ at ,1("3# 9s above> at ,1(,!# Ale=ander v 1orth #astern .ly Co 61!3*7 3 B @ ' 0)"# N,""1O 1 $&LR- +03# This case is further discussed later in this chapter# 'ee pa%e ), E ; P#

5> in his /ud%ment in the same case> too? the view> also obiter> that on the /ud%eJs findin%s> it would not be possible to say that it was reasonably foreseeable that the collectors would commit acts of assault or intimidation# 9lthou%h some collectors mi%ht employ such tactics> others acted responsibly# )#,1 In decidin% whether the duty of care has been properly dischar%ed> the standard of care is to be determined ob/ectively# Le 5ichon J9 mentioned the followin% facts as relevant in decidin% that the duty of care would not have been dischar%ed in 8ong 8ai Hing 9 (ung Siu !ing v Hui 8ei !ee: the process of selection adopted by the creditor was no more than loo?in% up an advertisement in a popular newspaper> the absence of an address> telephone and fax numbers in the letter of appointment and a%reement> the collection a%ent was remunerated purely on a contin%ency basis> and no enFuiries were made re%ardin% the credentials of the collection a%ency> such as its si:e> its clientele> how lon% it had been established and its modus operandi#

L%a)%l%ty 'or tort%ou+ a*t+ *o//%tt!( )y ot#!r+

)#,, Liability for torts committed by others can arise in three situations# The first is where there is a master and servant relationship# The second is an employerJs liability in certain limited circumstances for torts committed by an independent contractor# 9nd the third is where a principal is vicariously liable for torts committed by an a%ent#

M%ster %n+ serv%nt

)#,0 The employer is liable for the torts of the employee so lon% as they are committed in the course of the employeeJs employment# The nature of the tort is immaterial and the employer is liable even where liability depends upon a specific state of mind and his own state of mind is innocent# )+ In the context of debt collection> if a debt collector is the employee of 9BC Ltd> and a tort is committed by the debt collector in the course of his employment> then both 9BC Ltd and the debt collector are re%arded as /oint tort(feasors# )#,) -ifficult Fuestions may arise as to whether or not a person is an employee of another# There are various tests to determine the matter# The classic test for distin%uishin% an employee from an independent contractor is the KcontrolJ test> i#e# the employerJs ri%ht to control the method of doin% the wor?#)! The inadeFuacy of the KcontrolJ test was brou%ht out in a series of cases#) )#,* The deficiencies of the KcontrolJ test have led to attempts to formulate other criteria# In Stevenson/ ?ordan 9 Harrison !td v Macdonald 9 #van*" -ennin% LJ su%%ested the so(called Kor%anisationJ or Kinte%ration testJ>
)+ )! ) *"

Cler? @ Lindsell> cited above> at *(,"# 9s above> at *("*# 9s above> at *("+# N1 *,O 1 TLR 1"1#

)"

and said: @under a contract of service/ a man is employed as part of the business/ and his $or is done as an integral part of the businessD $hereas/ under a contract for services/ his $or / although done for the business/ is not integrated into it but is only accessory to itABJ5 )#,3 The more modern approach is to abandon the idea of a simple test and to ta?e a Kmultiple factorJ approach by ta?in% into consideration all aspects of the relationship#*, In .eady Mi=ed Concrete )South #ast, !td v Minister of Pensions and 1ational 'nsurance >*0 after a full review of the authorities> it was held that a contract of service exists if: @)i, the servant agrees that in consideration of a $age or other remuneration he $ill provide his o$n $or and s ill in the performance of some service for his masterD he agrees/ e=pressly or impliedly/ that in the performance of that service he $ill be sub%ect to the other2s control in a sufficient degree to ma e that other masterD the other provisions of the contract are consistent $ith its being a contract of serviceAB

)ii,

)iii,

)#,+ In Mar et 'nvestigations !td v Minister of Social Security>*) Coo?e J set out a non(exhaustive list of factors to be ta?en into account> in addition to that of control> includin% whether the wor?er provides his own eFuipment> whether he hires his own helpers> what de%ree of financial ris? he ta?es> what de%ree of responsibility for investment and mana%ement he has> and whether and how far he has an opportunity of profitin% from sound mana%ement in the performance of his tas?#** This approach was approved by the 5rivy Council in !ee Tin Sang v Chung Chi Keung#*3 )#,! 1here the relationship of employer and employee exists> the employer is liable for the torts of the employee only if they are committed in the course of the employeeJs employment# The most freFuently adopted test*+ is %iven by 'almond>*! namely that an act is deemed to be done in the course of employment> @if it is either )5, a $rongful act authorised by the master/ or )*, a $rongful and unauthorised mode of doing some act authorised by the masterA 't is clear that the master is responsible for acts actually authorised by himH for liability $ould e=ist in this case/ even if the relation bet$een the parties $as merely one of agency/ and not one of service at allA 3ut a master/ as opposed to the employer of an independent contractor/ is liable even for

*1 *, *0 *) ** *3 *+ *!

9s above> at pa%e 111# Cler? @ Lindsell> cited above> at *(" # N1 3!O , PB ) +# N1 3 O , PB 1+0# 9s above> at 1!*# N1 "O , 9C 0+)# Cler? @ Lindsell> cited above> at *(,1# Salmond and Heuston on the !a$ of Torts 6,"th edition> 1

07 at pa%e )*+#

)1

acts $hich he has not authorised/ provided they are so connected $ith acts $hich he has authorised that they may rightly be regarded as modes 4 although improper modes 4 of doing themAB )#, Even if the act in Fuestion is expressly prohibited by the employer> he may still be liable> and the test stated in the previous para%raph will have to be applied# In !impus v !ondon <eneral &mnibus CoA Jnotwithstandin% express instructions not to race with> or obstruct other omnibuses> the driver of the omnibus obstructed the plaintiffJs omnibus and caused a collision# The defendants as employers were held liable for the dama%e caused to the plaintiffJs omnibus# In CAPA.A v !oc hart>3" an employee was authorised to use his own car on certain /obs> provided his car was properly insured# The employee caused dama%e whilst drivin% an uninsured car for the purposes of his wor?# The 5rivy Council held that> despite the employerJs express prohibition on the use of an uninsured car> the employers were liable for the dama%e caused# This should be contrasted with a case where there is express prohibition as to the sphere of employment rather than the mode of carryin% it out# In Kooragang 'nvestments Pty !td v .ichardson 9 8rench !td/L5 the employer was not liable because the employee had been expressly prohibited from carryin% out valuations for a particular %roup which was not then a client of the employer# In 'qbal v !ondon Transport #=ecutive/3, a bus conductor was ordered to %et an en%ineer to move a par?ed bus# 9lthou%h the bus conductor was expressly prohibited from drivin% buses> he attempted to drive the bus himself> and the court found that his acts were outside the course of his employment# The effect of any prohibition placed by the employer actually depends on analysis of the nature of the employeeJs duties> the prohibition> and what actual breach of the prohibition is committed#30 )#0" In circumstances where the employer either expressly or by implication %ave the employee a discretion which he must exercise in the course of his employment> the employer will be liable for the wron%ful exercise of such a discretion#3) If tas?s have been dele%ated to the employee in very %eneral terms> then the implication is that the employee is %ranted the discretion to decide how the tas?s may best be completed# 3* )#01 9n employer would be able to avoid liability if it is shown that the employee was actin% Gon a frolic of his ownH> 33 that is> doin% somethin% totally unconnected with his /ob# The Fuestion depends on the de%ree of deviation by the employee#3+ In Dyer v MundayL+ a hire(purchase furniture dealer sent its employee to recover certain furniture# The employee was prevented from
* 3" 31 3, 30 3) 3* 33 3+ 3!

61!3,7 1 $ @ C *,3# N1 ),O 9C * 1# N1 !,O 9C )3,# 61 +07 13 &IR 0 > C9# Cler? @ Lindsell> cited above> at *(,*# 9s above> at *(01# 9s above> at *(0)# ?oel v Morrison 61!0)7 3 C @ 5 *"1 at pa%e *"0# Cler? @ Lindsell> cited above> at *(0"# N1! *O 1 PB +),#

),

doin% so by a third party> who was then assaulted by the employee# The court held that the employee remained within the course of his employment> and the employer was liable for the assault because the assault was committed in furtherance of the employerJs business> and not for the employeeJs private purposes#3 )#0, 1hether or not an act is done in the course of employment may be a difficult Fuestion of fact+" and much depends on the circumstances of the case# )#00

The employer has been held liable in the followin% cases: 9n employee struc? a boy under the mista?en belief that the boy was stealin% the employerJs %oods#+1 9 solicitorJs cler? fraudulently induced a client to transfer property to him#+, 9 fur %arment was sent to a furrier for cleanin%# The furrier> with the customerJs consent> sent it to the defendant company and the %arment was stolen by an employee of the defendant company#+0 The employer> on the other hand> was not liable in the followin% 9 bar mana%er %rabbed a customer to shield himself from assaults by a robber> and caused the customer to be stabbed in the arm#+) 9 barmaid threw a bottle at a customer who had provo?ed her# +* 9 bus conductor assaulted a passen%er followin% an ar%ument# +3 9 %ara%e attendant assaulted a customer of the %ara%e out of personal ven%eance#++

)#0) instances:

Emplo&erFs li%?ilit& for in+epen+ent $ontr%$tors

)#0* 9s a %eneral rule> an employer is not liable for the tortious acts of an independent contractor in the course of execution of the wor?> except where the employer has authorised the wron%ful act# The law has> however>

3 +" +1 +, +0 +) +* +3 ++

The case may also be analysed on the basis of the wron%ful exercise of the discretion vested in the employee# 'ee Cler? @ Lindsell> cited above> at *(0)# Cler? @ Lindsell> cited above> at *(,1 and *(00# Poland v Parr N1 ,+O 1 &B 033# !loyd v <race/ Smith 9 Co N1 1,O 9C +13# Morris v C 8 Martin 9 Sons !td N 1 3*O , 9ll ER +,*# .eily v .yan N1 1O 1 LR= )) # Deaton v (le$ 61 ) 7 + CLR 0+"# Keppel 3us Co !td v Sa2ad bin Ahmad N1 +)O , 9ll ER +""# 8arren v Henlys !td N1 )!O , 9ll ER 0*#

)0

imposed liability on employers in some circumstances# If the law imposes on an employer a strict or absolute duty> often described as Knon(dele%ableJ duty> then he is liable even thou%h the immediate cause of the dama%e is the contractorJs wron%ful act or omission# +! 'uch Knon(dele%ableJ duties may arise either by statute or at common law# Liability will also exist in relation to dan%erous operations in the vicinity of a hi%hway and also in respect of acts which are considered to be extra ha:ardous#+ 9s for Kextra(ha:ardousJ acts> it appears from Honey$ill and Stein !td v !ar in 3ros !td !" that a Knon( dele%ableJ duty exists whenever an independent contractor is employed to perform an Kextra(ha:ardousJ act# -ifficulty> however> arises in determinin% what constitutes Kextra(ha:ardousJ# 9ccordin% to 'lesser LJ> Kextra(ha:ardousJ acts were Gacts which> in their very nature> involve in the eyes of the law special dan%er to othersD of such acts the causin% of fire and explosion are obvious and established instancesH#!1 There is an unavoidable de%ree of uncertainty surroundin% this issue because what mi%ht be inherently ha:ardous previously may no lon%er be so re%arded %iven technolo%ical advancement#

#rin$ip%lFs vi$%rious li%?ilit& for torts $ommitte+ ?& %gent

)#03 1hether or not a principal is vicariously liable for torts committed by an a%ent in the absence of a Gmaster and servantH relationship is less clear> and the issue was examined by the Court of 9ppeal in a debt collection context in 8ong 8ai Hing 9 (ung Siu !ing v Hui 8ei !eeA +* It should be noted that the court %ave leave to the defendant to appeal to the Court of Ainal 9ppeal a%ainst the decision# $owever> the defendant failed to comply in time with the conditions imposed on the %rantin% of leave and the appeal was not proceeded with# The defendant> a creditor> believin% she was entitled to be repaid C M1*">""" by the plaintiff> employed a debt collection a%ency to collect the debt for her# The defendant found the name of the collection a%ency from an advertisement in a popular Chinese newspaper# The written contract stipulated that G5arty B a%rees to collect the debt wholly by lawful means# R if any ille%al means is used or if any criminal liability is incurred> 5arty 9 shall not be held responsibleH# Remuneration was on a contin%ency basis at 0*I of whatever amount recovered# The collection a%ents committed acts of intimidation and assault in the course of attemptin% to collect the debts# The plaintiff sou%ht dama%es and an in/unction a%ainst further assault and intimidation# The Court of 9ppeal held that the defendant was liable for the torts of intimidation and assault which were committed by

+! + !" !1 !,

Cler? @ Lindsell> cited above> at *()+# Per .ogers C"P in 8ong 8ai Hing 9 (ung Siu !ing v Hui 8ei !ee/ cited above# N1 0)O 1 &B 1 1# 9s above> at 1 +# N,""1O 1 $&LR- +03#

))

the collection a%ent by word of mouth# !0 )#0+ In the /ud%ment> Ro%ers 4(5 referred to Atiyah2s Cicarious !iability in the !a$ of Torts/ 5-L6 which discerned three different theories in relation to whether a principal is liable for the torts of an a%ent# Ro%ers 4(5 said that: @(irst/ there are those $ho assert that the la$ recognises a general principle of vicarious liability for the torts of an agentA Then there are those/ comprising the ma%ority of #nglish $riters $ho deny the relevance of the category of agents altogetherA The third main theory is that/ $hile there is no general principle of liability for agents there are certain e=ceptional cases/ in particular those $here one $ho delegates to another the function of representing him in the course of a transaction of a consensual/ but not necessarily contractual/ nature is liable for torts committedAB!) )#0! Ro%ers 4(5 went on to say that: @An e=tensive revie$ of the authorities and of the te=tboo s has led me to the conclusion that $hilst there is no general principle of liability for agency that is because the term agent can be used to cover a variety of different situationsA To a large e=tent each case must be considered separately to determine $hether the agent is truly acting in an independent $ay such that his actions as a contractor might be truly vie$ed as independent of the principal/ or $hether his actions are so intimately representative of the principal that the principal cannot be divorced from themA 'n the latter case ' consider that the la$ imposes liability on a principal for torts committed by an agentAB !* )#0 Ro%ers 4(5 further said that: @The defendant had as ed :ue Hoi to represent herA She $as not specific as to the methods that $ould be employed by :ue Hoi and its employees/ including Mr K$ongA 't can only be inferred that they $ould use such tactics as persuasion/ embarrassment and even harassmentA As the %udge himself noted harassment is not illegalA Thus approaches to the plaintiffs/ their employers and their staff could be said to be part of the e=pected armoury of the debt collectorA 'n acting as a debt collector/ :ue Hoi and its staff $ere empo$ered to collect the debtA :ue Hoi and its staff $ere representing the defendant
!0

!) !*

Ro%ers 4(5 held that the defendant was not liable for the act of sprayin% red paint at the plaintiffJs place of wor?# @'n my vie$ the spraying of red paint at the plaintiff2s place of $or cannot on any footing be considered to be part of the $or underta en by the debt collector unless it is considered that once a debt collector is engaged/ any tactics employed by him fall $ithin $hat $ould be contemplated as a normal course of conduct by a debt collectorA ' $ould categorise the spraying of red paint as one of physical violenceA &bviously if a triad is engaged/ such tactics may be contemplatedA 3ut this is not such a caseBA 9t +)! C# 9t +) C#

)*

$hen the plaintiffs $ere approached and spo en toA 'n my vie$/ therefore/ Mr K$ong and Mr Chan $ere doing that $hich the defendant had as ed them to do/ namely/ to use colloquial terms/ ma e such a nuisance of themselves that the 5st plaintiff $ould pay :ue Hoi/ $ho $ould receive the money on behalf of the defendantA 'n a general sense that $as the tas that they $ere engaged to doA K The only question $hich remains/ therefore/ is $hether the instructions and directions $hich the defendant gave/ that only legal means $ere to be used/ $ere sufficient to ta e Mr K$ong2s and Mr Chan2s conduct outside the scope of that $hich :ue Hoi and its servants had been engaged to doA K 3ut $hat seems to be critical is $hether the directions given by the defendant/ to use only legal means/ limited the sphere of employment iAeA the class of acts $hich could be done or merely regulated the conduct $ithin that sphere iAeA the mode in $hich those acts could be doneA K 'n my vie$/ the underta ings given to the defendant $ere underta ings as to the mode of carrying out the debt collection/ they did not restrict the sphere of employment or the class of acts $hich could be doneAB !3 )#)" Le 5ichon J9 was of the view> with &eith J9 a%reein% that> a principal could be liable for the wron%ful acts of its a%ents under the principles set out in Colonial Mutual !ife Assurance Society !td v Producers and CitiMen2s Co"operative Assurance Co of Australia !td 61 017 )3 CLR )1 6Gthe Colonial =utual principlesH7# In the Colonial =utual case> the appellant had en%a%ed R as a canvasser and a%ent under an a%reement# R was not an employee but an independent contractor# The a%reement expressly prohibited the a%ent from usin% defamatory lan%ua%e or writin%# The a%ent> however> in attemptin% to obtain business for the appellant made defamatory statements concernin% the respondent which was another assurance company# Cavan -uffy CJ and 'tar?e J 6citin% Barwic? v En%lish Joint 'toc? Ban? 61!3+7 LR , Ex ,* and Lloyd v Crace> 'mith @ Co N1 1,O 9C +137 held that a person: @K is liable for another2s tortious act Eif he e=pressly directs him to do it or if he employs that other person as his agent and the act complained of is $ithin the scope of the agent2s authorityA2 't is not necessary that the particular act should have been authoriMed H it is enough that the agent should have been put in a position to do the class of acts complained of KB -ixon J 6with whose /ud%ment Rich J a%reed7> also found a%ainst the appellant# Reco%ni:in% that normally an independent contractor carries out his wor? not as a representative but as a principal> he nevertheless held that:

!3

9t +*3 $ ; +*+ C#

)3

@K $hen the function entrusted is that of representing the person $ho requests its performance in a transaction $ith others/ so that the very service to be performed consists in standing in his place and assuming to act in his right and not in an independent capacity K in performing these services for the Nprincipal/ the agentO does not act independently/ but as a representative of the NprincipalO/ $hich accordingly must be considered as itself conducting the negotiation in his personAB In such a situation> the effect was that the appellant: @K in confiding to his %udgment/ $ithin the limits of relevance and of reasonableness/ the choice of inducements and arguments/ authorised him on its behalf to address to prospective proponents such observations as appeared to him appropriateA The underta ing contained in his contract not to disparage other institutions is not a limitation of his authority but a promise as to the manner of its e=erciseA AAAB )#)1 Le 5ichon J9 held that the case before the court appeared to be on all fours with Colonial =utual> and said: @The principle of la$ that can be distilled from that case is that a principal may be liable for the torts of his agent $here the agent $as not acting in an independent capacity but in a representative one standing in the place of his principal and the very service to be performed consisted in standing in the principal2s placeA The liability is therefore personal rather than vicariousA The function entrusted is that of representing the person $ho requests its performance/ not merely in a transaction $ith others but is an activity $here others can be seen to be closely affectedA That $hich gives rise to liability must be done for and on behalf of another/ $hich is not the same as saying simply that it is for his benefit or at his requestA See per #veleigh ? in 1ottingham v Aldridge N5-65O * P3 6F- at 6J*CAB!+

P!r+o&al Data APr%4a*yB Or(%&a&*!

)#), 4ictims of abusive debt collection activities may also have a civil cause of action pursuant to the 5ersonal -ata 65rivacy7 8rdinance 6Cap )!37#!! This is discussed in the next chapter#

!+ !!

9t ++" A# 'ection 33#

)+

C#a"t!r 6 Ot#!r ty"!+ o' *o&trol o& (!)t *oll!*t%o&

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

A(/%&%+trat%4! *o&trol
*#1 9t present> debt collection a%encies and debt collectors operatin% in $on% &on% are not reFuired to be re%istered or licensed# The only statutory administrative reFuirement they face prior to commencin% business is to obtain a business re%istration certificate under the Business Re%istration 8rdinance 6Cap 01"7# *#, 1hilst there is no licensin% reFuirement to operate a debt collection business> ban?s and other authori:ed institutions providin% consumer credit are sub/ect to re%ulation by the $on% &on% =onetary 9uthority and persons carryin% on business as money lenders are reFuired to be licensed annually under the =oney Lenders 8rdinance 6Cap 1307# 1

S!l'1r!$ulat%o& )y aut#or%@!( %&+t%tut%o&+

(o+e of !%nking #r%$ti$e G D55;
*#0 In 1 +> the $on% &on% 9ssociation of Ban?s 6Gthe $&9BH7 and the -TC 9ssociation 6Gthe -TC9H7 , /ointly issued a non(statutory Code of Ban?in% 5ractice in 1 + 6Gthe CodeH7# The aim of the Code is to foster customer confidence in the ban?in% system throu%h the promotion of %ood and fair ban?in% practices# 9lthou%h the Code was issued on a voluntary basis> the $on% &on% =onetary 9uthority 6Gthe $&=9H7 monitors its compliance as part of its re%ular supervision of authori:ed institutions# 0

(o+e of !%nking #r%$ti$e G -e$em?er 233D

*#) 9 comprehensive review of the Code was conducted in ,""1 by a wor?in% %roup comprisin% representatives of the $&=9> $&9B and the -TC9# The wor?in% %roup consulted industry associations and the Consumer Council with the ob/ective of revisin% the Code to ensure that it stri?es a reasonable balance between consumer ri%hts and efficiency of ban?in%
1 , 0

The annual licence fee is at present $&M!>!""# The processin% time of first(time applications is normally 0 months# The $on% &on% 9ssociation of Restricted Licence Ban?s and -eposit(ta?in% Companies# 5ara%raph 1#) of the Code of Ban?in% 5ractice 1 +#

)!

operations# The revised Code too? effect from 1 -ecember ,""1> and authori:ed institutions are expected to comply with the new provisions by 1st June ,"", at the latest> except for those provisions reFuirin% system chan%es> in which case> another 3 months is allowed for compliance# *#* The Code contains seven chapters# Chapter * lays down %uide( lines on debt collection wor? conducted by parties other than authori:ed institutions# The %uide(lines have been expanded and improved in the revised Code#) The relevant clauses are as follows: @FLA Debt Collection by Third Party Agencies FLA5 't is essential that debt collection agencies should act $ithin the la$/ refrain from action pre%udicial to the business/ integrity/ reputation or good$ill of the institutions for $hom they are acting and observe a strict duty of confidentiality in respect of customer informationA 'nstitutions should enter into a formal/ contractual relationship $ith their debt collection agencies $hich/ among other things/ enforces these requirementsA The contract should ma e it clear that the relationship bet$een the institution and the debt collection agency is one of principal and agentA

QFLA* .elated to the above/ institutions should specify/ either in the contract or by means of $ritten instructions/ that their debt collection agencies must not resort to intimidation or violence/ either verbal or physical/ against any person in their debt recovery actionsA 'n addition/ institutions should require their debt collection agencies not to employ harassment or improper debt collection tactics such as the follo$ingH )a, Harassment tactics )i, putting up posters or $riting on the $alls of the debtor2s residence or other actions designed to humiliate the debtor publiclyD )ii, pestering the debtor $ith persistent phone callsD )iii, ma ing telephone calls at unreasonable hoursD and )iv, pestering the debtor2s referees/ family members and friends for information about the debtor2s $hereaboutsA &ther improper tactics )i, using false names to communicate $ith the debtorD )ii, ma ing anonymous calls and

)b,

Clauses mar?ed with asteris?s below are new provisions#

)iii, )iv,

sending unidentifiable notes to the debtorD ma ing abusive or threatening remar s to the debtorD and ma ing false or misleading representations $ith an intent to induce the debtor to ma e a paymentA

FLAF

'nstitutions and their collection agencies should not try to recover debts/ directly or indirectly/ from third parties including referees/ family members or friends of the debtors if these persons have not entered into a formal contractual agreement $ith the institutions to guarantee the liabilities of the debtorsA 'nstitutions should issue $ritten instructions to their debt collection agencies/ or include a clause in the contract $ith their agencies/ to this effectA 'nstitutions should not pass information about referees or third parties other than debtors or guarantors to their debt collection agenciesA 'f the referee is to be approached for information to help locate the debtor or guarantor/ this should be done/ $ithout causing nuisance to such third parties/ by staff of the institutionA 'nstitutions intending to use debt collection agencies should specify in the terms and conditions of credit or credit card facilities that they may employ third party agencies to collect overdue amounts o$ed by the customersA 'nstitutions $hich reserve the right to require customers to indemnify them/ in $hole or in part/ for the costs and e=penses they incur in the debt recovery process should include a $arning clause to that effect in the terms and conditionsA 'nstitutions should remain accountable to customers for any complaints arising out of debt collection by third party agencies and should not disclaim responsibility for misconduct on the part of the debt collection agenciesA 'nstitutions should give the customer advance $ritten notice )sent to the last no$n address of the customer, of their intention to commission a debt collection agency to collect an overdue amount o$ed to the institutionA The $ritten notice should include the follo$ing information " )a, the overdue amount repayable by the customerD

FLAG

FLAJ

FLAL

FLA6

*"

)b, )c,

the length of time the customer has been in defaultD the contact telephone number of the institution2s debt recovery unit $hich is responsible for overseeing the collection of the customer2s debt to the institutionD the e=tent to $hich the customer $ill be liable to reimburse the institution the costs and e=penses incurred in the debt recovery process )if the institution requires the customer to indemnify it for such costs and e=penses,D and that the customer should in the first instance report improper debt recovery actions ta en by the debt collection agency to the institutionA

)d,

)e,

FLA+

'nstitutions should not engage more than one debt collection agency to pursue the same debt in one %urisdiction at the same timeA 'nstitutions should require their debt collection agencies/ $hen collecting debts/ to identify themselves and the institution for $hom they are actingA 'nstitutions should issue authoriMation documents to their debt collection agencies $hich should be presented to the debtor for identification purposes $hen required to do soA

FLA-

FLA57 'nstitutions should establish effective communication $ith their debt collection agencies and systems for prompt updating of the agencies on the amount of repayment made by customers so that the agencies $ill stop immediately all recovery actions once the debts are settled in full by the customersA FLA55 'f a customer o$es several debts to more than one institution that are being collected by the same debt collection agency/ the customer has the right to give instructions to apply repayment to a particular debtA QFLA5* 'nstitutions should stop their debt collection activities on a debtor once they become a$are that a ban ruptcy order has been issued in relation to the debtorA F6A Management Agencies of .elationship $ith Debt Collection

*1

QF6A5 'nstitutions should have proper systems and procedures in place for the selection of debt collection agencies and the monitoring of their performanceA These systems and procedures should be sub%ect to regular revie$ and should consist of the follo$ing essential elements 4 )a, a revie$ of the bac ground information of the debt collection agency including a company search to identify the o$ners and directors of the debt collection agencyD a basic assessment of the financial soundness of the debt collection agencyD a site visit to ascertain the business address of the debt collection agencyD an evaluation of the operation of the debt collection agencyD and in the case of appointing a ne$ debt collection agency/ a procedure to obtain references from at least t$o of the e=isting clients )preferably authoriMed institutions, of the agencyA

)b, )c, )d, )e,

F6A*

'nstitutions should encourage their debt collection agencies to aspire to the highest professional standards and/ $here appropriate/ to invest in suitable systems and technologyA Debt collection agencies should not be given a free hand as to recovery proceduresA 'nstitutions should establish effective procedures to monitor continuously the performance of their debt collection agencies/ particularly to ensure compliance $ith the provisions in paragraphs FLA* and FLAF aboveA

F6 F

QF6AG 'nstitutions should evaluate on a regular basis $hether the charges of the debt collection agencies employed by them are reasonable having regard to the prevailing mar et practicesA They should assess the reasonableness of any charge before passing it on to the customer concernedA F6AJ 'nstitutions should require debt collection agencies to inform customers that all telephone communication $ith customers $ill be tape recorded and the purpose of doing so/ and to eep records of all other contacts $ith customersA Such records should include information on the agency staff ma ing the contactD the date/ time and place of contactD and a report on the contactA 3oth the tape and the records should be ept for a minimum of F7 days after the contact is madeA 'nstitutions should ma e unscheduled visits to the agencies to inspect their professionalism/ operational integrity/ the involvement of suitably trained personnel and the adequacy of resources to cope $ith the business volumes assigned to them and to ensure agencies2 compliance $ith their contractual underta ingsA *,

F6AL

QF6A6 'nstitutions should have established procedures to handle complaints received from debtorsA They should carry out a careful and diligent inquiry into the complaint to chec $hether there is any misconduct on the part of the debt collection agency and $hether there is any violation of the requirements contained in the CodeA 'nstitutions should require debt collection agencies to ta e appropriate remedial actions if necessaryA F6A+ 'nstitutions should maintain a register of complaints about improper actions ta en by their debt collection agencies and should respond promptly to the complainants after investigationA 'nstitutions should not delegate authority to the debt collection agencies to institute legal proceedings against customers $ithout the institution2s formal approvalA

F6A-

F6A57 'nstitutions should specify in their contracts $ith debt collection agencies that the agencies should not sub"contract the collection of debts to any other third partiesA F6A55 8here institutions are a$are that their debt collection agencies perform similar functions for other institutions/ the sharing of information as to their performance/ approach/ attitude/ behaviour etc is encouragedA F6A5* 'nstitutions should bring apparently illegal behaviour by debt collection agencies to the attention of the PoliceA 'nstitutions should also consider $hether to terminate the relationship $ith a debt collection agency if they are a$are of unacceptable practices of that agency or breaches of its contractual underta ingsAB *#3 9lthou%h the $&=9Js principal function in relation to ban?in% supervision is to promote the %eneral stability and effective wor?in% of the ban?in% system> it has also underta?en to promote and encoura%e proper standards of conduct and prudent business practices amon%st authori:ed institutions# Aailure by an institution to comply with the Code may call into Fuestion whether it continues to meet the criteria for authorisation# *#+ 'ince the Code was introduced in 1 +> the $&=9 has underta?en to monitor compliance as part of its re%ular supervision# To step up its efforts in this aspect> a new self(assessment framewor? has been introduced and ban?s will be reFuired to file annual assessment reports to $&=9 startin% in 'eptember ,"",# In addition> the $&=9 will continue to conduct special examinations on a selected basis if reFuired> and monitor compliance throu%h processin% customer complaints lod%ed a%ainst ban?s#

*0

P!r+o&al Data APr%4a*yB Or(%&a&*! ACa" 5:7B a&( t#! Co(! o' Pra*t%*! o& Co&+u/!r Cr!(%t Data 2002
#erson%l -%t% '#riv%$&) Or+in%n$e
*#! The 5ersonal -ata 65rivacy7 8rdinance 6Gthe 8rdinanceH7 lays down six data protection principles that provide for %eneral reFuirements for parties that collect> hold> process or otherwise use personal data# Two of the data protection principles are of particular relevance to debt collection activities# *# -ata 5rotection 5rinciple ,617 reFuires that all reasonably practicable steps be ta?en to ensure that personal data are accurate and if personal data are ?nown to be inaccurate> to ensure they are not used or are deleted# ConseFuently> a creditor should not disclose inaccurate personal data to a debt collection a%ency> and a debt collection a%ency should not use inaccurate personal data for debt collection# The use of inaccurate personal data contrary to -ata 5rotection 5rinciple ,617 could include disclosure by a creditor to a debt collector of a previous address of a debtor# It could also include the situation where a debt collection a%ency deliberately sends demand letters ostensibly addressed to a debtor to nei%hbourin% addresses to humiliate the debtor# *#1" -ata 5rotection 5rinciple 0 limits the use of personal data to purposes for which the data were to be used when they were collected> or purposes directly related thereto> unless the consent of the data sub/ect has been obtained for some other use of the data# The use of personal data includes disclosure of the data# 'ub/ect to the data sub/ectJs consent> a creditor> therefore> should not disclose to a debt collection a%ency any personal data that were not collected for the purpose of debt collection or a purpose directly(related thereto# Aor example> information relatin% to loan referees is not collected by creditors for debt collection purposes and should therefore not be disclosed to debt(collectors# *#11 Contravention of a data protection principle is not an offence> * but an individual who suffers dama%e as a result of such a contravention in relation to his personal data has a civil cause of action 3 entitlin% him to dama%es> includin% dama%es for in/ury to feelin%s# In addition> such an individual could ma?e a complaint to the 5rivacy Commissioner for 5ersonal -ata 6Kthe 5rivacy CommissionerJ7# 8n receipt of such a complaint> the 5rivacy Commissioner may carry out an investi%ation and> in an appropriate case may issue an enforcement notice + containin% specific directions reFuirin% future compliance with the data protection principle that has been breached# .on(compliance with such an enforcement notice constitutes an offence# !

* 3 + !

'ection 3)61"7# 'ection 33# 'ection *"# 'ection 3)6+7#

*)

(o+e of #r%$ti$e on (onsumer (re+it -%t% 2332

*#1, 9 Code of 5ractice on Consumer Credit -ata was issued by the 5rivacy Commissioner for 5ersonal -ata in Aebruary 1 ! pursuant to the powers conferred on him by 5art III of the 5ersonal -ata 65rivacy7 8rdinance 6Cap )!37# The Code too? effect on ,+ .ovember 1 !# 9 revised version of the Code was %a:etted by the 5rivacy Commissioner on !th Aebruary ,"", and too? effect on 1st =arch ,"",# *#10 9lthou%h the provisions of the Code are not le%ally bindin%> breach of any provision by a data user will %ive rise to a presumption a%ainst the data user in any le%al proceedin%s under the 5ersonal -ata 65rivacy7 8rdinance 6Cap )!37# The basic aim of the Code is to re%ulate the handlin% of consumer credit data by credit providers and credit reference a%encies# The Code has no application to commercial credit# 1" The Code covers the handlin% of consumer credit data by credit reference a%encies> 11 and by credit providers in their dealin%s with credit reference a%encies and debt collection a%encies# 1ith respect to debt collection a%encies> the Code is concerned only with the disclosure of information by credit providers 1, to such a%encies and their use of such information# *#1) If a credit provider uses the service of a debt collection a%ency> the followin% provisions have to be complied with:

Clause FA*H A credit provider should notify an applicant for consumer credit/ at or before the time of collection of his personal data/ that the data may be supplied to a debt collection agency in the event of defaultA The notification should also mention that the individual applicant has the right/ upon request/ to be informed $hich items of data are routinely so disclosed/ and be provided $ith further information to enable the ma ing of an access and correction request to the relevant credit reference agency or debt collection agency/ as the case may beA Clause FAGH A credit provider should only provide consumer credit data to a debt collection agency after chec ing the data for accuracyA 'f the amount in default is subsequently repaid or $ritten off in full or in part/ or if any scheme of arrangement is entered into $ith the individual/ or if the credit provider discovers any inaccuracy in the data $hich have been provided to and $hich the credit provider reasonably believes are being retained by the debt

1" 11 1,

'ection 10 of the 5ersonal -ata 65rivacy7 8rdinance 6Cap )!37# Clause )#1 This aspect will be discussed later in this Consultation 5aper# GCredit providerH is defined as @any data user $ho carries on a business involving the provision of consumer credit to individuals/ $hether or not that business is the sole or principal activity of that data userAB GConsumer creditH is defined as @any loan/ overdraft facility or other ind of credit provided by a credit provider to an individual in his personal capacity/ not for the purpose of or related to any commercial enterpriseA 'n this conte=t/ an individual acquiring consumer goods from a credit provider on lease or on hire"purchase is deemed to be provided $ith credit by the credit provider to the e=tent of the value of those goods/ any amount overdue under the lease or hire" purchase agreement is deemed to be an amount in default under the individual2s account $ith the credit provider/ and all related terms and e=pressions are to be construed accordinglyAB

**

collection agency/ the credit provider should notify the debt collection agency promptly of such factA

Clause FA+H Sub%ect to clause FA- of the Code/ if a credit provider decides to use a debt collection agency for collection against an individual in default/ it should only provide to the agency information relating directly to the individualA That information should only consist of particulars to enable identification and location of the individual/ including address and contact information/ the nature of the credit/ amount to be recovered and details of any goods sub%ect to repossessionA Clause FA-H A credit provider should not provide any consumer credit data to a debt collection agency for debt collection unless: " a formal contract has been e=ecuted to require/ or $ritten instructions have been issued under such a contract to require/ the debt collection agency to follo$ such conduct as stipulated by the 3an ing Code10 in relation to debt collection agencies instructed by authorised institutionsD and the credit provider is satisfied/ on the basis of previous dealings $ith the debt collection agency/ the reputation of such debt collection agency or other reasonable grounds/ that the agency $ill fully comply $ith the requirement as aforesaidA1)

"

10 1)

Code of Ban?in% 5ractice discussed earlier# Clause 0#!#

*3

C#a"t!r 7 D!'%*%!&*%!+ o' t#! !0%+t%&$ *o&trol+ o& a)u+%4! (!)t *oll!*t%o& "ra*t%*!+
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Cr%/%&al la9
3#1 1e examined in Chapter 0 the criminal offences that are applicable to debt collection activities# These include intimidation> criminal dama%e> theft and blac?mail> assault> false imprisonment> triad offences> and certain offences under the 'ummary 8ffences 8rdinance 6Cap ,,!7# 1e have also discussed how both corporate and non(corporate employers of debt collectors may be held criminally liable for the acts of debt collectors# There is thus a ran%e of criminal sanctions which can be deployed# These come with heavy custodial and financial penalties to deal with abusive debt collection practices# Criminal sanctions> however> are not a complete answer for the followin% reasons: 6a7 =any crimes involvin% debt collection are not reported to the 5olice# -ebtors and victims may also be reluctant to co(operate with the 5olice# There are several possible explanations for this ( 6i7 6ii7 -ebtors may fear reprisals and retaliation# There are a considerable number of people who try to delay payin% their debts and who are prepared to be pushed a considerable distance before they pay# Intimidation may be re%arded as part of the ne%otiation process and debtors would therefore be unwillin% to ta?e the matter up with the 5olice# 'ome debtors are unwillin% to divul%e the full picture# They ma?e reports to the 5olice only with a view to fendin% off debt collectors for the time bein%> but with no intention of ta?in% further action a%ainst the perpetrators# 'ome debtors are %enuinely hard(pressed financially and feel that they are in the wron% when they cannot repay their loans# 'ome debtors may even feel that debt collectors have the ri%ht to ta?e some abusive action to recover debts# 'ome debtors may neither be aware of the extent of the protection afforded by the criminal law nor that intimidation and persistent nuisance calls may constitute *+

6iii7

6iv7

6v7

criminal offences# 6vi7 In cases where the abused person is not the debtor himself> he or she may not be able to provide sufficient information to the 5olice#

6b7

1hilst the criminal law may be effective in dealin% with the more extreme debt collection practices involvin% criminal acts> it is not effective a%ainst nuisances caused by non(criminal tactics or those activities on the borderline of propriety# These may include postin% of posters and repayment notices outside the debtorJs home and officeD alle%in% that the debtor is in financial difficulty or ma?in% false accusationsD ma?in% persistent but non(threatenin% telephone calls and personal visits> and %enerally harassin% debtorsJ nei%hbours and family members# 'uch nuisance tactics fall within the %rey areas which are not adeFuately defined or re%ulated# 'uch %rey areas are undesirable> since debtors> creditors and debt collectors ali?e are not certain of their ri%hts and obli%ations# The 5olice may be unable to follow up an alle%ation of an act on the borderline of le%ality# The onus of provin% a crime is hi%h and the prosecution has to prove beyond reasonable doubt all the reFuired elements of the crime# Because of these safe%uards> it may often be difficult to secure convictions# There are also enforcement problems# 9s mentioned by the representative of the police at a meetin% of the Le%islative Council 5anel on 'ecurity meetin% on 1" June 1 3> there were problems Gparticularly in the identification of the offenders> because(: 6a7 these activities were normally conducted late at ni%htD and 6b7 when debt collectors resorted to ille%al tactics> the debtors would normally repay the debt immediately and would then be reluctant to pursue the case further#H

6c7

6d7

3#, These factors perhaps account for the relatively low detection rate of debt collection related cases# In 1 > the detection rate of debt collection related cases was only !#)I> compared to ),#*I for overall crime# In ,"""> the respective fi%ures were ,,#,I 1 and )0#3I# In ,""1> the respective fi%ures were #3I and ))I#

C%4%l *la%/+
3#0 1e have also examined in previous chapters a number of civil actions which may be of assistance to debtors> includin% assault and battery> false imprisonment> intentional physical harm other than trespass to the person> trespass to chattels> defamation> ne%li%ence> and employersJ liability
1

The hi%h detection rate was attributed to the arrest of a lar%e(scale syndicate in a police operation#

*!

and principalsJ liability in civil claims# It remains to be considered how effective these remedies are as a control on abusive debt collection practices# If an a%%rieved debtor has the resources> alternatively Fualifies for and obtains le%al aid> to brin% a civil action> he may be awarded dama%es and an in/unction# 8n the other hand> he also faces the possibility of losin% the case and havin% to pay for his own le%al costs and part of the opponentJs le%al costs# 3#) $ence> civil remedies are not usually useful to the avera%e debtor# 9s stated by the Institute of Law Research and Reform of Edmonton> 9lberta: @The legal system does not operate by itselfD it must be triggered by the victim commencing and carrying for$ard a la$ suit against his defendantA Such an action $ill involve e=pense and delays/ as $ell as uncertainties as to a successful outcomeA 1or is the average debtor li ely to have the courage/ much less the means/ to turn the tables on his creditor and sue for damages for e=cessive or unreasonable collection practicesA The paucity of reported cases in Canada appears to support the conclusion that most cases of creditor harassment are unli ely to lead to a la$suit/ unless the facts are e=traordinary and the potential damage a$ard is largeA The upshot is that a debtor $ho has been sub%ected to unreasonable collection efforts is unli ely to commence a common la$ action and carry it to %udgement unless the case is an e=traordinary oneA #ffective controls over the collection practices of creditors or their agents must be sought else$hereAB,

S!l'1r!$ulat%o& )y aut#or%@!( %&+t%tut%o&+

3#* 1e have examined in a previous chapter 0 the non(statutory voluntary code issued /ointly by the $on% &on% 9ssociation of Ban?s and the -TC 9ssociation> the Code of Ban?in% 5ractice ; ,""1#

(o+e of !%nking #r%$ti$e G -e$em?er 233D

3#3 The effectiveness of the %uidelines in the Code of Ban?in% 5ractice> albeit practical and useful> suffer from its limited scope of application# The Code re%ulates only a fraction of debt collection activities# It applies only to authori:ed institutions> that is> ban?s> restricted licence ban?s>

, 0

Debt Collection Practices> 6Report .o# ),> 1 !)7> at para%raphs )#,> )#3# 'ee para%raphs *#) ; *#+#

and deposit(ta?in% companies#) 8ther creditors includin% individuals> tradin% companies> mobile telephone companies> estate a%ents and money lenders are not sub/ect to the Code# It is clearly anomalous for debt collection a%encies to abide by the %uidelines only in those cases where the clients are authori:ed institutions# This may also result in unfair competition# Ta?e the example of a debtor with M1"">""" worth of assets# $e borrows M1"">""" from Creditor 9> which is not bound by the Code> after borrowin% M1"">""" from a ban?# 9s Creditor 9 is not bound by the Code> it will be able to en%a%e a debt collector who does not comply with the relevant reFuirements of the Code* than one actin% for the ban?> which is bound by the Code# In such circumstances> the debtor is more li?ely to satisfy the debt owed to Creditor 9 first> %iven the potentially more compellin% collection tactics> and the ban? may not be repaid at all# This would be all the more unfair to the ban? which may have acted prudently when the ban? loan was %ranted> especially since the debtor had at that time M1"">""" worth of assets# Creditor 9 mi%ht have been a%%ressive in %rantin% the subseFuent loan since the debtorJs indebtedness had increasedD yet> it is more li?ely to %et his money bac?# This limited application of the Code may thus also lead to unfair competition amon% debt collectors# 9ccordin%ly> as most debt collectors earn their fees on a contin%ency basis> the restricted scope of application of the Code may wor? unfairly a%ainst those wor?in% for authori:ed institutions#

P!r+o&al Data APr%4a*yB Or(%&a&*! ACa" 5:7B a&( t#! Co(! o' Pra*t%*! o& Co&+u/!r Cr!(%t Data < 2002
3#+ 1e examined in the previous chapter 3 the 5ersonal -ata 65rivacy7 8rdinance 6Gthe 8rdinanceH7 and the Code of 5ractice on Consumer Credit -ata 6Gthe CodeH7# Civen that the primary le%islative intent of the 8rdinance is to protect the privacy of individuals in relation to personal data> the 8rdinance> and hence the Code> are not intended to be a comprehensive means of re%ulatin% debt collection activities# The reFuirements of the 8rdinance are by no means applicable to the whole ran%e of abusive behaviour in which some debt collection a%encies en%a%e as such behaviour does not necessarily involve the use of personal data# Aurther> the reFuirements of the 8rdinance that are most li?ely to apply to improper debt collection practices are the reFuirements of the data protection principles# $owever> these are stated in broad terms %ivin% wide scope for interpretation# Even where it is clear that the reFuirements of the data protection principle

The $& 9ssociation of Ban?s and the -TC 9ssociation have recently set up a Code of Ban?in% 5ractice Committee which would provide %uidance on interpretin% the Code and underta?in% future review of the Code# 9lthou%h> the Committee will not enforce the Code as such> the %uidance it offers on interpretin% the Code should help improve compliance in %eneral# .ote that the Ainance $ouses 9ssociation has a code of practice> and the =oneylenders 9ssociation may issue one shortly# 9lthou%h the ris? of this should be reduced to some extent by the provisions of clause 0# of the 5rivacy CommissionerJs Code of 5ractice on Consumer Credit -ata# In summary> this reFuires all credit providers usin% debt collection a%encies to instruct them to follow the debt collection %uidelines of the Ban?in% Code# It also reFuires a credit provider not use a debt collection a%ency unless the credit provider is satisfied> on %ood %rounds> that the debt collection a%ency will comply with the said %uidelines# 'ee para%raphs *#! ; *#1) above#

3"

apply and have been breached> the 8rdinance may not always be an effective means of protectin% individuals from the abusive practices concerned# Airst> the only sanction for such a breach is a civil action to which the drawbac?s identified above in relation to pursuin% civil actions %enerally apply# 'econdly> while the individual whose personal data is the sub/ect of the breach may ma?e a complaint to the 5rivacy Commissioner> his investi%ative powers are limited: he has no power> for example> to sei:e evidence of the breach# In addition> while the 5rivacy Commissioner has the power to prevent the repetition or continuation of a breach of the 8rdinance throu%h the issuin% of enforcement notice> he has no power to award any compensation to the victim of such a breach or to institute civil proceedin%s in the victimJs name to obtain such compensation#

31

C#a"t!r 8 Co/"arat%4! la9

,,,,,,,,,,,,,,,,,,,,,

I&tro(u*t%o&
+#1 Compared with $on% &on%> debt collectors and debt collection a%encies are sub/ect to more re%ulation and control in many other /urisdictions> includin% the <nited &in%dom> 9ustralia> Canada and the <nited 'tates of 9merica# 9part from the traditional criminal and civil sanctions similar to> or the same as> those already surveyed in previous chapters on the law in $on% &on%> debt collection is re%ulated by specific statutory provisions in other /urisdictions# 'uch le%islation> other than le%islation providin% for the licensin% of debt collection a%encies> will be examined in this chapter# In addition> this chapter contains an examination of other le%islation in the <& of relevance to debt collection> althou%h not specifically aimed at it# Le%islation on the licensin% of debt collection a%encies will be discussed in the followin% chapter#

U&%t!( K%&$(o/
The $rimin%l offen$e of unl%wful h%r%ssment of +e?tors
+#, The 9dministration of Justice 9ct 1 +" introduced the criminal offence of unlawful harassment of debtors# It is punishable on summary conviction by a fine of not more than level * on the standard scale> which is S*>""" at present#+ The offence is aimed at tac?lin% the common malpractices of debt collection# The reFuirements of the offence are set out in section )"617 of the 9ct> which reads as follows: @A person commits an offence if/ $ith the ob%ect of coercing another person to pay money claimed from the other as a debt due under a contract/ he "

But different amounts may be substituted by order under the =a%istratesJ Courts 9ct 1 !"> section 1)0#

3,

)a,

harasses the other $ith demands for payment $hich/ in respect of their frequency or the manner or occasion of ma ing any such demand/ or of any threat or publicity by $hich any demand is accompanied/ are calculated to sub%ect him or members of his family or household to alarm/ distress or humiliationD falsely represents/ in relation to the money claimed/ that criminal proceedings lie for failure to pay itD falsely represents himself to be authorised in some official capacity to claim or enforce paymentD or utters a document falsely represented by him to have some official character or purporting to have some official character $hich he no$s it has notAB

)b, )c, )d,

+#0 By virtue of section )"607> sub(para%raph 6a7 has no application in respect of anythin% done which is reasonable 6and otherwise permissible in law7 for the purpose of: 6i7 securin% the dischar%e of an obli%ation due> or believed by him to be due> to himself or to persons for whom he acts> or protectin% himself or them from future lossD or the enforcement of any liability by le%al process#

6ii7

+#) 8n the other hand> the scope of sub(para%raph 6a7 is extended by section )"6,7> which stipulates that a person may be %uilty of an offence under sub(para%raph 6a7 if he acts in concert with others in the ta?in% of such action as is described in sub(para%raph 6a7> notwithstandin% that his own course of conduct does not by itself amount to harassment# -ependin% on the facts of the case> there is an ar%ument that a creditorJs employment of a debt collection a%ency whose methods are ?nown to be offensive> may amount to Gconcertin% with othersH#! +#* The case of 1or$eb plc v Di=on explains two aspects of section )"617> namely> what is meant by the phrases Gmoney claimed from the other as a debt due under a contractH and Gcalculated to sub/ectH# 8n 1+ Aebruary 1 ,> -ixon became the tenant and occupier of premises in =anchester> and was on that date supplied with electricity at his reFuest# In =ay 1 0> the electricity company sent -ixon a letter alle%in% that he owed S3++#!3 for electricity that had been supplied to another address where he had never lived# -ixon too? steps to inform the electricity company of the mista?e by ma?in% telephone calls and payin% personal visits# 8n , July 1 0> -ixonJs electricity meter was recalibrated without his ?nowled%e# 9fter the electricity company finally accepted that -ixon was not responsible for the debt> -ixon filed an action under section )"6176a7> claimin% that> as he was in receipt of income support of only S00 per wee?> he had to %o without food on occasions to meet the increased electricity meter payments> and he was also worried and shoc?ed by the electricity companyJs letters and actions# The ma%istrate found there was a contractual relationship between the parties and the
!

J & Catenby> Par 2s Collection of Debts> 1 +3 at pa%e +1# N1 *O 0 9ll ER *,#

30

electricity company had unlawfully harassed -ixon# +#3 The conviction was Fuashed on appeal# It was held that> %iven the wordin% Gmoney claimed ### as a debt due under a contractH> the offence does not reFuire proof of the existence and terms of a contract which has in fact been concluded> any more than it reFuires proof that the debt is in fact due# 1hat is reFuired is proof that the supplier has made demands for payment of a debt that he claims to be due under a contract that he claims to exist# There were no findin%s of such claims# The electricity company had purported to act under the powers conferred by statute# It was also held that there was> in fact> no contract between the parties because the le%al compulsion both as to the creation of the relationship and the fixin% of its terms is inconsistent with the existence of a contract# +#+ 1ith re%ard to the meanin% of Gcalculated to sub/ectH> the court held that the phrase did not mean Gintended to sub/ectH> but meant Gli?ely to sub/ectH# In McDo$ell v Standard &il Co )1e$ ?ersey, >1" it had been held that the words Gcalculated to deceiveH under section 11 of the Trade =ar?s 9ct 1 "* did not mean Gintended to deceiveH but Gli?ely 6or reasonably li?ely7 to deceive or mislead the trade or the public ###H# 9 similar meanin% of GcalculatedH was adopted in Turner v Shearer11 involvin% an offence under section *,6,7 of the 5olice 9ct 1 3) of wearin% articles of police uniform Gcalculated to deceiveH# +#! There is no reported case on sub(para%raphs 6b7> 6c7 and 6d7# The meanin% of the word G?nowsH in sub(para%raph 6d7 has been sub/ect to much /udicial attention in different contexts# &nowled%e has been held to include the state of mind of a person who shuts his eyes to the obvious# 1, There is also authority for sayin% that where a person deliberately refrains from ma?in% inFuiries the results of which he mi%ht not care for> this constitutes in law actual ?nowled%e of the facts in Fuestion# 10 The mere ne%lect> however> to ascertain what could have been found out by ma?in%

1" 11 1, 10

N1 ,+O 9C 30,# N1 +0O 1 9ll ER 0 +# ?ames 9 Son !td v Smee N1 **O 1 PB +! at 1# $alsburysJ 'tatutes 6)th edition7 vol 1, at pa%e *)*#

3)

reasonable inFuiries is not tantamount to ?nowled%e# 1)

#rote$tion from H%r%ssment *$t D55;

+# The 5rotection from $arassment 9ct 1 + was enacted on ,1 =arch 1 +# The aim of the 9ct> as stated in its preamble> is to ma?e provisions for protectin% persons from harassment and similar conduct# $arassment of a person includes causin% alarm or distress# 1* +#1" 'ections 1 to + of the 9ct apply to En%land and 1ales> and sections ! to 11 extend to 'cotland# The 9ct is %enerally not applicable to .orthern Ireland#13

#ngland and 8ales

+#11 The 9ct creates two criminal offences and one civil remedy# The criminal offences are for harassment and for puttin% people in fear of violence# The civil remedy is for harassment#

&ffence of harassment
+#1, The reFuirements of the offence of harassment are set out in sections 1 and , of the 9ct# If a person pursues a course of conduct 1+ 6that is> by speech or by behaviour on at least two occasions 1!7> which amounts to harassment of another> and which he ?nows or ou%ht to ?now amounts to harassment of the other> that person is %uilty of the offence of harassment# +#10 9 person ou%ht to ?now his course of conduct amounts to harassment if a reasonable person in possession of the same information would thin? the course of conduct amounted to harassment of the other# 1 +#1) 9 person has a defence if he is able to show the course of conduct was pursued under any of the followin% three %rounds: 6a7 6b7 for the purpose of preventin% or detectin% crime> under any enactment or rule of law or to comply with any condition or reFuirement imposed by any person under any enactment> or in the particular circumstances the pursuit of the course of conduct was reasonable#," 9 person %uilty of the offence of harassment is liable on
9s above# 'ee also .oyal 3runei Airlines Sdn 3hd v Tan N1 'ee sections +6,7 and !607# 'ection 1)# 'ection +6)7# 'ection +607# 'ection 16,7# 'ection 1607# *O , 9C 0+! 5C#

6c7 +#1*
1) 1* 13 1+ 1! 1 ,"

3*

summary conviction to imprisonment for a maximum term of six months andLor a maximum fine of S*>"""# The court may also ma?e a restrainin% order a%ainst the defendant either for a specified period or until further order# ,1 Breach of the terms of a restrainin% order without reasonable excuse is punishable on indictment with imprisonment for a maximum term of five years andLor a fine#

&ffence of putting people in fear of violence

+#13 Compared with the offence of harassment> this is a more serious offence punishable on indictment with a maximum term of five years and by a fine# The reFuirements of the offence of puttin% people in fear of violence are set out in section ) of the 9ct# If a person whose course of conduct 6that is> by speech or by behaviour on at least two occasions7 causes another to fear that violence will be used a%ainst him> and that person ?nows or ou%ht to ?now that his course of conduct will cause the other so to fear on each of those occasions> that person is %uilty of the offence# 9s with the offence of harassment> the standard of the reasonable person in possession of the same information is adopted to determine whether the defendant ou%ht to ?now his acts would cause another to fear violence# +#1+ 9s with the offence of harassment> a defendant has a defence if his course of conduct was to prevent or detect crime or was pursued under any enactment> rule of law> or to comply with any condition or reFuirement imposed by any person under any enactment# The third defence ( if the pursuit of the defendantJs course of conduct was reasonable for the protection of himself> another> or for the protection of his or anotherJs property ( is more restrictive than the defence of reasonable conduct available to the offence of harassment#,, +#1! In sentencin% or otherwise dealin% with a person convicted of

,1 ,,

'ection *# 'ection )6076c7#

33

the offence of harassment or the offence of puttin% people in fear of violence> the court has the /urisdiction to ma?e restrainin% orders prohibitin% the defendant from doin% anythin% described in the order# ,0 Breach of the terms of a restrainin% order without reasonable excuse is punishable on conviction on indictment with imprisonment for a maximum of five years and by a fine# ,)

Civil remedy
+#1 9ny actual or apprehended commission of the offence of harassment may %ive rise to a claim in civil proceedin%s whereby dama%es may be awarded for> inter alia> anxiety caused by the harassment and any financial loss resultin% from the harassment# ,* The plaintiff may also apply to the court for an in/unction to restrain the defendant from pursuin% any conduct which amounts to harassment# ,3 The plaintiff may further apply to court for an arrest warrant if the defendant is in breach of the in/unction# ,+ If a defendant is in breach of an in/unction without reasonable excuse> he may be liable> on conviction on indictment> to imprisonment for a maximum of five years and to a fineD and on summary conviction> to imprisonment for a maximum of six months and to a fine#,!

Scotland
+#," The provisions applicable to 'cotland are %enerally similar to those for En%land and 1ales> except that they are simpler# Instead of creatin% two criminal offences and one civil remedy> the 5rotection from $arassment 9ct 1 + creates for 'cotland only a civil remedy for any actual or apprehended breach of the prohibition a%ainst pursuin% a course of conduct which amounts to harassment# , The reFuirements of the civil remedy> as well as the available defences> are similar to those for En%land and 1ales# The court has power to award dama%es for anxiety and financial loss and to %rant interdict0" or a non(harassment order#01 Breach of a non( harassment order is punishable by a maximum term of five years and by a fine#0, The court may %rant a non(harassment order if it is satisfied on a balance of probabilities that it is appropriate to do so in order to protect the victim from further harassment#00

,0 ,) ,* ,3 ,+ ,! , 0"

01 0, 00

'ection *617 and 6,7# 'ection *637# 'ection 0617 and 6,7# 'ection 06076a7# 'ection 0607# 'ection 0637 and 6 7# 'ection !6,7# Interdict is a remedy by decree of Court> either a%ainst a wron% in the course of bein% done or a%ainst an apprehended violation of a partyJs ri%hts> only to be awarded on evidence of the wron% or on reasonable %rounds of apprehension that such violation is intended# 'ection !6*76b76ii7# 'ection # 'ection 11# 9lso> section ,0)9 of the Criminal 5rocedure 6'cotland7 9ct 1 *#

3+

M%li$ious (ommuni$%tions *$t D599

+#,1 The preamble of the =alicious Communications 9ct 1 !! states that it was enacted to ma?e provision for the punishment of persons who send or deliver letters or other articles for the purpose of causin% distress or anxiety# +#,, @5A By virtue of section 1 of the 1 !! 9ct: )5, Any person $ho sends to another person " )a, a letter or other article $hich conveys " )i, a message $hich is indecent or grossly offensiveD )ii, a threatD or )iii, information $hich is false and no$n or believed to be false by the senderD or )b, any other article $hich is/ in $hole or in part/ of an indecent or grossly offensive nature/ is guilty of an offence if his purpose/ or one of his purposes/ in sending it is that it should/ so far as falling $ithin paragraph )a, or )b, above/ cause distress or an=iety to the recipient or to any other person to $hom he intends that it or its contents or nature should be communicatedAB +#,0 9lthou%h the above provisions are applicable to certain debt collection activities> $ansard records that the 9ct is aimed at affordin% more protection to victims of Khate mailJ or Kpoison(pen lettersJ> includin% public fi%ures> families of non(stri?in% miners> and ethnic minorities> and that it see?s to ma?e provision for offensive articles or messa%es sent other than by post or by telephone# +#,) 9 defence is available for a person demandin% repayment of a debt where the party ma?in% the demand believes he has reasonable %rounds for doin% so# 9 person would not be held %uilty of subsection 6176a76ii7 if he shows ( @)a, )b, that the threat $as used to reinforce a demand $hich he believed he had reasonable grounds for ma ingD and that he believed that the use of the threat $as a proper means of reinforcing the demandAB

9s a %eneral matter> abusive debt collection activities are unli?ely to fall within the scope of the defence#

3!

Au+tral%a
1e+er%l legisl%tion
+#,* The Trade 5ractices 9ct 1 +) is the only federal le%islation %overnin% %eneral debt collection practices in 9ustralia 0)# It applies to: a7 b7 c7 corporationsD individuals en%a%ed in international> interstate or territory trade or trade with the CommonwealthD individuals usin% postal> tele%raphic or telephonic services# 0*

+#,3 =ost creditors collectin% their own debts> professional debt collectors and collection a%encies would fall within cate%ories 6a7 and 6c7# 9n instance not covered would be one in which only personal visits are made by an individual creditor or by an individual debt collector> in the course of collectin% a debt from another individual in respect of a debt which does not arise from international or interstate or Commonwealth trade and commerce#03 Relevant provisions of the Trade 5ractices 9ct 1 +) are sections *,> *0 and 3"# +#,+ 'ection 3" provides that the use of physical force> undue harassment or coercion in connection with the supply of or payment for %oods or services by or to a consumer is prohibited# The prohibition> it seems> is not limited to conduct directed to the debtor only> but extends to conduct directed to the debtorJs family or associates# 0+ The 9ct does not further defined what constitutes Gphysical force> undue harassment or coercionH# +#,! 'ection *0 prohibits the ma?in% of a false or misleadin% statement concernin% Gthe existence> exclusion or effect of any condition> warranty> %uarantee> ri%ht or remedyH in connection with the supply of %oods or services# 9lthou%h it is possible that this prohibition extends to the ma?in% of false or misleadin% statements concernin% a creditorJs remedies upon default> it is more li?ely that the section is limited to false or misleadin% statements concernin% the debtorJs ri%hts as a purchaser# 0! +#, 'ection *, prohibits the use in trade or commerce of misleadin% or deceptive conduct# In 1 ++> the section was amended to include conduct that is li?ely to mislead or deceive# This amendment ma?es clear that an intention to deceive is not necessary> nor is it necessary that any person is in fact deceived# It is> however> unclear whether the standard of the avera%e person or that of the defendantJs actual or constructive ?nowled%e would be adopted to determine whether the conduct is li?ely to mislead or deceive# 0 It is probable that an ob/ective standard is applicable# +#0" The Trade 5ractices 9ct 1 +) imposes both civil and criminal remedies for breaches of sections *0 and 3"> but only civil remedies are
0) 0* 03 0+ 0! 0

9ustralian Law Reform Commission> .eport on Debt .ecovery and 'nsolvency> Report .o# 03 at para%raph ,+# 'ections 36,7> 607 of the Trade 5ractices 9ct 1 +)# 9ustralian Law Reform Commission> cited above> at para%raph 1+"# 9s above> at para%raph ,+# 9s above# 9s aboveA

available for breaches of the %eneral prohibition on misleadin% or deceptive conduct referred to in section *,# The criminal sanctions are fines of up to 9<-M,">""" for an individual or up to 9<-M1"">""" for a corporation# )" The civil remedies include dama%es> in/unctions and ancillary orders#

*ustr%li%n (ompetition H (onsumer (ommission v M$(%ske& H (%sh 6eturn Mer$%ntile #T, Lt+
+#01 'ections 3" and *, of the Trade 5ractices 9ct 1 +) have been examined by the Aederal Court of 9ustralia in Australian Competition 9 Consumer Commission v McCas ey 9 Cash .eturn Mercantile PT: !td AC9 1"0+>)1 in which the 9ustralian Aederal Court made some observations on the sections# The case involved a collection a%ency> GCash ReturnH> and its employee> =s 'haryn =cCas?ey> both of whom were sued by the 9ustralian Competition @ Consumer Commission 6Gthe 9CCCH7 and consented to the ma?in% of various orders by way of declaration and in/unction# The tas? before the court was to consider whether the proposed orders were intra vires and appropriate# In connection with the interpretation of section 3" and KharassmentJ> Arench J observed: @The $ord @harassmentB as used in s L7 must serve t$o broad purposesA 't describes a range of conduct/ in connection $ith the supply of goods or services $hich involve/ inter alia/ applying repeated pressure to a consumer $ho is under no pre" e=isting obligation to acquireA 't also describes conduct in relation to a consumer $ho is under an unfulfilled obligation to pay for goods or servicesA <iven the range of cases that it can cover/ the question $hether or not there is harassment involves evaluative %udgmentA The $ord @undueB adds an e=tra layer of evaluation $hich is more relevant to the case of debt recovery than to the sale of goods or servicesA .epeated un$elcome approaches to a potential acquirer of goods or services could qualify as harassment and/ so qualified/ require very little additional evidence/ if any/ to attract the characterisation of @undue harassmentBA &n the other hand a consumer $ho o$es money to a supplier can e=pect repeated un$elcome approaches requesting payment of the debt if he or she does not payA 1o doubt such approaches might also qualify as harassmentA 'f legitimate demands are reasonably made/ on more than one occasion/ for the purpose of reminding the debtor of his or her obligation and dra$ing the debtor2s attention to the li elihood of legal proceedings if payment is not made/ then that conduct/ if it be harassment/ is not undue harassmentA 'f/ ho$ever/ the frequency/ nature or content of the approaches and communications associated $ith them is such that they are calculated to intimidate or demoralise/ tire out or e=haust a debtor rather than convey the demand and an associated legitimate threat of proceedings/ the harassment $ill be undueAB +#0,
)" )1

1ith re%ard to the meanin% of KcoercionJ in section 3"> Arench J

'ection + of the Trade 5ractices 9ct 1 +)# $anded down in 9u%ust ,"""#

+"

said: @The collection of debts may involve coercion in the sense that the debtor is sub%ected to the pressure of the demand and the legitimate threat of civil process for recovery $ith the additional cost and damage to credit $hich that can involveA Such pressure may be thought of as coercion but is entirely legitimate and not @undueBA 8here the demand includes content $hich does not serve legitimate purposes of reminding the debtor of the obligation and threatening legal proceedings for recovery but is calculated other$ise to intimidate or threaten the debtor/ then the coercion may be undueA So if a threat is made of criminal proceedings/ or of the immediate seiMure and sale of house and property/ a remedy not available in the absence of retention of title or some form of security/ the coercion is li ely to be seen as undueA The threat of criminal proceedings itself may be an offence against State la$sA Puite apart from content the manner or circumstances of a demand or communication/ including the language used/ the time and place at $hich it is made and the person to $hom it is communicated/ may go beyond the legitimate purposes of dra$ing attention to the e=istence of the obligation and the consequences for non" complianceA Again such a communication may amount to undue coercionA &bvious e=amples include the use of personally abusive or obscene language/ conveying the demand to uninvolved family members/ particularly children/ or conveying the demand through a third party in order to embarrass the debtor $hen the debtor could reasonably have been the sub%ect of a direct communicationA #ach case $ill turn on its o$n factsA KB +#00 9s for section *, on misleadin% or deceptive conduct> Arench J declined to ma?e an order in connection with one of the alle%ed incidents that constituted contravention of the section# $e observed that: @An agent $ho/ on instructions/ asserts that an alleged debtor is liable and see s payment of the debt under threat of recovery action does not engage in misleading or deceptive conduct %ust because/ on the true facts of the case/ the alleged debtor is not liableA The assertion of liability if reasonably based on instructions/ may be the statement of an opinion honestly held or a representation of the opinion of the creditorA A legal practitioner $riting a letter of demand on instructions $hich there are no reasons to disbelieve/ does not engage in misleading or deceptive conduct if a court subsequently finds there to be no liabilityA The declaration alleges simply that there $as no legal liability on the part of the Campbells thereby falsifying the assertion to the contrary attributed to Ms McCas eyA 't does not allege a statement by Ms McCas ey of an opinion $hich she did not hold or for $hich there could be no reasonable basisA &n the face of it the third paragraph of the +1

declaration does not identify a contravention of s J* and ' decline to ma e itAB +#0) 9s a%ainst the debt collector> the court ordered that: 6i7 a declaration should be made that it had used undue harassment and coercion a%ainst certain named persons> contrary to sections 3" and *,D 6ii7 an in/unction for three years restrainin% the collection a%ency from repeatin% conduct mentioned in the declarationD 6iii7 the debt collector should attend a Trade 5ractices Compliance 5ro%ramme seminarD and 6iv7 she should pay the 9CCCJs costs of proceedin%s# +#0* 9s a%ainst the collection a%ency> in addition to items 6i7> 6ii7 and 6iv7 in the precedin% para%raph> the court ordered that the a%ency should at its own expense publish an apolo%y of specified contents and si:e# In connection with the publication of an apolo%y or notice> Arench J said: @'n Australian Competition and Consumer Commission v .eal #state 'nstitute of 8estern Australia at 5F*"5FF ' revie$ed the authorities and principles governing the ma ing of such ordersA A legitimate purpose of an order for such advertisements flo$ing from contraventions of Part 'C or Part C is to inform the relevant public or mar ets of the outcome of the litigationA 'n that $ay the public and those in the relevant mar ets for goods and services have at least a broad understanding of the $ay in $hich the particular contraveners have behaved and have had to change their conductA They $ill increase the probability that the public and those in the relevant mar ets may be put on inquiry about the la$fulness of future conduct by the contravener $hich may be seen to breach the act and0or the in%unctions $hich have been grantedA 'n this $ay public advertising may assist in the enforcement of the in%unctive orders and the prevention of repetition of the contravening conductA 8hen there has been misleading or deceptive conduct/ a notice may be ordered to correct $hat has been mis" statedA 'mportantly it is not in my opinion appropriate to order such notices simply to announce a $in for the ACCC or the contrition of the respondentA 1or is the general education of the public about the Trade Practices Act a price to be e=acted from a respondent for transgressingA So the notice must be related to righting the $rong $hich has been done or aiding in the enforcement of the other orders madeA As $ith the debt collection process itself/ the test of the proposed course of action is $hether it is calculated to serve and only to serve the legitimate purposes of the la$A 'n this case the notice proposed is headed @An ApologyBA 1ot$ithstanding my reservations about the inappropriateness of orders for the publication of statements of contrition/ the proposed notice is an appropriate $ay of dra$ing to the +,

attention of those debtors $hom it $as sought to threaten/ intimidate and abuse/ that Cash .eturn accepts the inpropriety )sic, of that conductA 'n my opinion the notice is $ithin po$er and appropriate and orders $ill be made accordinglyAB

Other provisions %g%inst %?usive $olle$tion t%$ti$s

+#03 There are various sanctions a%ainst abusive debt collection practices# Criminal penalties are imposed for the followin% activities: By licensed debt collectors

Entry onto private premises without lawful authority# Pueensland and 4ictoria7

6In

'u%%estin% to debtors that additional authority is conferred upon a licensee by reason only of his licence# 6In all /urisdictions7 ), By all debt collectors

-emandin% payment of money by threatenin% detriment to any personJs credit ratin% or eli%ibility for credit> except where the money is owed to the person by whom or on whose behalf the demand is made and the threats relate simply to future extension of credit by that person# 6In Pueensland7 =isleadin% conduct> which includes dis%uisin% the creditorJs own collection department as independent debt collection a%encies> and usin% debt collection a%encies stationery when creditors write their own debt collection letters# 6In 'outh 9ustralia7 The deceptive collection tactic of usin% forms of demand which resemble court forms# 6In all /urisdictions except Tasmania and the 9ustralian Capital Territory7)0

T#! U&%t!( Stat!+ o' A/!r%*a

+#0+ The <nited 'tates of 9merica started to tac?le the problems arisin% from abusive debt collection practices throu%h le%islation in the 1 +"Js# 5rovisions a%ainst abusive debt collection practices were included in some model statutes such as the <niform Consumer Credit Code 61 +)7> the more pro(consumer .ational Consumer 9ct 61 +"7> and the =odel Consumer Credit 9ct 61 +07# These model statutes were enacted in some states with or without local variations#

The 1%ir -e?t (olle$tion #r%$ti$es *$t D5;;

+#0!
), )0

In 1 ++> the Aederal Covernment enacted the Aair -ebt

9ustralian Law Reform Commission> cited above> at para%raph 0"# 9ustralian Law Reform Commission> cited above> at para%raph 00#

+0

Collection 5ractices 9ct 6Gthe A-C59H7> which too? effect in 1 +!# The A-C59 is applicable only to the collection of consumer debts by collection a%encies# It does not apply to collection of commercial accounts> or to creditors collectin% their own debts# )) <nder a 1 !3 amendment to the A-C59> attorneys who collect debts on a re%ular basis are also covered by the A-C59# The A-C59 was enacted to eliminate abusive debt collection practices> to ensure that those debt collectors who refrain from usin% abusive debt collection practices are not competitively disadvanta%ed> and to promote consistent state action to protect consumers a%ainst debt collection abuses# )* +#0 9 debt collector may be sub/ect to civil liability under the 9ct# 9 debt collector who fails to comply with any provision of the 9ct with respect to any person is liable for the actual dama%e sustained by that person as a result of such failure#)3 9 person alle%edly harmed by proscribed debt collection practices directed towards the collection of another person2s debt has standin% to sue under the 9ct#

Harassment or abuse
+#)" 9 debt collector is %enerally prohibited from en%a%in% in any conduct the natural conseFuence of which is to harass> oppress> or abuse any person in connection with the collection of a debt# )+ <sually> whether conduct harasses> oppresses or abuses any person is a Fuestion of fact# )! The followin% cases show some examples of words or activities that are cau%ht by the provisions a%ainst harassment:

9 debt collector enFuired durin% a telephonic contact with the debtor> about the debtorJs personal /ewellery> which included references to hi%hly personal items li?e weddin% rin%s> and remar?s that the debtor Gshould not have children if she could not afford themH#) 9 collection a%ency sent a letter to an elderly disabled widow statin% that Gour field investi%ator has now been instructed to ma?e an investi%ation in your nei%hbourhood and to personally call on your employer>H and that Gthe immediate payment of the full amount> or a personal visit to this office> will spare you this embarrassmentH#*" 9 collection a%ency sent to the debtor a letter implyin% that the debtor i%nored her mail and her bills> and lac?ed the common sense to handle her financial matters properly> when in fact the

)) )* )3 )+ )! ) *"

American ?urisprudence 4ol 1+> ,nd edition> at para%raph 1 )# 9s aboveA 1* <'C T 13 ,?# Aair -ebt Collection 5ractices 9ct 1 ++ 1* <'C' TT13 ,d# ?eter v Credit 3ureau/ 'nc 6C9II Ca7 +3" A,d 113!# 3ingham v Collection 3ureau/ 'nc 6-C .-7 *"* A 'upp !3)> 3+ 9LR Aed *,# .utyna v Collection Accounts Terminal/ 'nc 6.- III7 )+! A 'upp !"#

+)

debtor had called the collection a%ency in response to an earlier letter> and the collection a%ency never returned her call# *1 +#)1 The followin% conduct is covered by the %eneral prohibition a%ainst harassment by debt collectors:

the use or threat of use of violence or other criminal means to harm the physical person> reputation> or property of any personD the use of obscene or profane lan%ua%e or lan%ua%e the natural conseFuence of which is to abuse the hearer or readerD the publication of a list of consumers who alle%edly refuse to pay debts> except to a consumer reportin% a%encyD the advertisement for sale of any debt to coerce payment of the debtD causin% a telephone to rin% or en%a%in% any person in telephone conversation repeatedly or continuously with intent to annoy> abuse> or harass any person at the called numberD and the placement of telephone calls without meanin%ful disclosure of the callerJs identity#*,

(alse/ deceptive/ or misleading representations or means

+#), The A-C59 prohibits a debt collector from usin% any false> deceptive> or misleadin% representation or means in connection with the collection of debt# 1ithout limitin% the %enerality of the provisions> certain conduct*0 is re%arded as violation of the statute:

The false representation or implication that the debt collector is vouched for> bonded by> or affiliated with the <nited 'tates or any state> includin% the use of any bad%e> uniform> or facsimile thereofD The false representation of the character> amount> or le%al status of any debt> or any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debtD The false representation or implication that any individual is an attorney or that any communication is from an attorneyD The false representation or implication that a sale> referral> or other transfer of any interest in a debt shall cause the consumer to lose any claim or defence to payment of the debt or become
Harvey v ;nited Ad%usters 6-C 8r7 *" A 'upp 1,1!A 1* <'C T 13 ,d> at Uhttp:LLwww#law#cornell#eduLuscodeL1*L13 ,d#htmlV# 1* <'C' TT13 ,c617 to 6137

*1 *, *0

+*

sub/ect to any practice prohibited by the Aair -ebt Collection 5ractices 9ctD

The false representation or implication that the consumer committed any crime or other conduct in order to dis%race the consumerD The false representation or implication that accounts have been turned over to innocent purchasers for valueD The false representation or implication that documents are le%al processesD The false representation or implication that documents are not le%al process forms or do not reFuire action by the consumerD The false representation or implication that a debt collector operates or is employed by a consumer reportin% a%ency#

+#)0 The threat to ta?e any action which cannot le%ally be ta?en or which is not intended to be ta?en constitutes a prohibited false> deceptive> or misleadin% representation or means in connection with the collection of debt# *) The Gleast sophisticated debtorH standard applies to an alle%ation that the debt collector made a threat to ta?e any action that could le%ally be ta?en# Thus> in evaluatin% the tendency of lan%ua%e to deceive> the court loo?s to the least sophisticated readersD the standard of ability and conduct to which a debtor should be held is only the low end of the spectrum of the Greasonable personH#**

;nfair practices
+#)) The A-C59 provides that a debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt# *3 1ithout limitin% the %eneral application of the provision> the followin% conduct *+ is desi%nated as violation of the statute:

the collection of any amount 6includin% any interest> fee> char%e> or expense incidental to the principal obli%ation7 unless such amount is expressly authorised by the a%reement creatin% the debt or permitted by lawD the solicitation by a debt collector of any postdated cheFue or other postdated payment instrument for the purpose of threatenin% or institutin% criminal prosecutionD depositin% or threatenin% to deposit any postdated cheFue or other postdated payment instrument prior to the date on such

*) ** *3 *+

9s above TT 13 ,e6*7# S$anson v Southern &regon Credit Service/ 'nc 6C9 1* <'C' TT13 ,f# 9s above TT13 ,f617 to 6!7#

8r7 !3 A,d 1,,,#

+3

cheFue or instrumentD

causin% char%es to be made to any person for communication by concealment of the true purpose of the communication# 'uch char%es include> but are not limited to> collection telephone calls and tele%ram feesD ta?in% or threatenin% to ta?e any non(/udicial action to effect dispossession or disablement of property if there is no present ri%ht to possession of the property claimed as collateral throu%h an enforceable security interest> there is no present intention to ta?e possession of the property> or the property is exempt by law from such dispossession or disablementD communicatin% with a consumer re%ardin% a debt by postcardD usin% any lan%ua%e or symbol> other than the debt collectorJs address> on any envelope when communicatin% with a consumer by use of the mails or by tele%ram> except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business#

Communications in connection $ith debt collection

+#)* Communications $ith the consumerH 1ithout the prior consent of the consumer %iven directly to the debt collector or the permission of a court> a debt collector may not communicate with a consumer in connection with the collection of any debt (

at any unusual time or place or a time or place ?nown to be inconvenient to the consumerD*! if the debt collector ?nows that the consumer is represented by an attorney and has ?nowled%e of the attorneyJs name and address> unless the attorney fails to respond within a reasonable time to a communication from the collector or unless the attorney consents to direct communicationD at the consumerJs place of employment if the collector ?nows or has reason to ?now that the employer prohibits the consumer from receivin% such communication#*

+#)3 Communications $ith third parties: 1ithout the prior consent of the consumer %iven directly to the debt collector or the permission of a court> or unless reasonably necessary to %ive effect to a post(/ud%ment /udicial remedy> a debt collector may not communicate in connection with the collection of the debt with any person other than the consumer> his attorney> a consumer reportin% a%ency> the creditor> the creditorJs attorney> or the collectorJs attorney#3"
*! * 3"

This usually means from ! p#m# to 1* <'C T 13 ,c6a7# 9s above T 13 ,c6b7#

a#m#

++

+#)+ Ceasing communications: If a consumer notifies a debt collector in writin% that the consumer refuses to pay a debt or that he wishes the collector to cease further communication with him> the collector must not communicate further with the consumer with respect to such debt except to advise the consumer that the collectorJs further efforts are bein% terminated> to notify the consumer that the collector or creditor may invo?e specified remedies ordinarily invo?ed by them> or to notify the consumer that the collector or creditor intends to invo?e a specified remedy# 31

Acquisition of location information

+#)! 9 debt collector who see?s to communicate with any person other than the consumer for the purpose of acFuirin% Glocation informationH 3, about the consumer has to comply with the followin% reFuirements: 30

identify himself and state that he is confirmin% or correctin% location information concernin% the consumerD not state that the consumer owes any debtD not communicate with any such person more than once unless reFuested to do so by such personD not communicate by post cardD not use any lan%ua%e or symbol on any envelope or in the contents of any communication effected by the mails or tele%ram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debtD and after the debt collector ?nows that the consumer is represented by an attorney with re%ard to the sub/ect debt> not communicate with any person other than that attorney#

(urther protection to consumers

+#) The A-C59 further protects consumers by postin% the followin% information on the Internet:3)

@A collector may contact you in person/ by mail/ telephone/ telegram/ or (ARA Ho$ever/ a debt collector may not contact you at unreasonable times or places/ such as before + am or after -A77 pAmA/ unless you agreeA A debt collector also may not contact you at $or if the collector no$s that your employer disapprovesA :ou may stop a collector from contacting you by $riting a letter to the collection agency telling them to stopA &nce the agency receives your letter/ they may not contact you again

31 3, 30 3)

9s above T 13 ,c6c7# I#e# information about a consumerJs place of abode and his telephone number at such place> or his place of employment# 1* <'C T 13 ,b# http:LLwww#webcom#comLWlewroseLbrochureLfdcpa#html#

+!

e=cept to say there $ill be no further contactA Another e=ception is that the agency may notify you if the debt collector or the creditor intends to ta e some specific actionA

'f you have an attorney/ the debt collector may not contact anyone other than your attorneyA 'f you do not have an attorney/ a collector may contact other people/ but only to find out $here you live and $or A Collectors usually are prohibited from contacting such permissible third parties more than onceA 'n most cases/ the collector is not permitted to tell anyone other than you and your attorney that you o$e moneyA 8ithin five days after you are first contacted/ the collector must send you a $ritten notice telling you the amount of money you o$e/ the name of the creditor to $hom you o$e the money/ and $hat action to ta e if you believe you do not o$e the moneyA A collector may not contact you if/ $ithin F7 days after you are first contacted/ you send the collection agency a letter stating you do not o$e moneyA Ho$ever/ a collector can rene$ collection activities if you are sent proof of the debt/ such as a copy of a bill for the amount o$edA :ou have the right to sue a collector in a state or federal court $ithin one year from the date you believe the la$ $as violatedA 'f you $in/ you may recover money for the damages you sufferedA Court costs and attorney2s fees also can be recoveredA A group of people also may sue a debt collector and recover money for damages up to IJ77/777/ or one percent of the collector2s net $orth/ $hichever is lessAB

Ca&a(a
1e+er%l
+#*" The federal %overnment attempted to introduce a Borrowers and -epositors 5rotection 9ct in 1 +3> but did not succeed# 3* In 1 00> the Conference of Commissioners on <niformity of Le%islation in Canada had considered the desirability of preparin% a uniform collection a%ents 9ct# The Conference> however> decided in 1 0) not to proceed with the matter# 33 -ebt collection le%islation in Canada> therefore> is confined to provincial le%islation#

3* 33

Institute of Law Research and Reform of Edmonton> 9lberta> Debt Collection Practices 1 !)/ at para%raph 1#!# 9s above/ at para%raph 1# #

*l?ert%
+#*1 9lberta enacted le%islation %overnin% the activities of debt collections as early as 1 3*# The le%islation was Collection 9%encies 9ct 1 3*#3+ The 9ct was primarily concerned with the re%ulation of the relationship between a%encies and their creditor clients> thou%h sections 10 and 1) empowered the 9dministrator of the 9ct to prohibit the use of misleadin% collection letters by collection a%encies> individual collectors> and other persons includin% creditors collectin% their own debts# 3! Barristers and solicitors were excluded from the application of the 1 3* 9ct# 8ffences under the 1 3* 9ct were punishable by fine or imprisonment and mi%ht be ta?en into account in the %rant or renewal of a licence> or its suspension or cancellation#3 +#*, In 1 +!> the 1 3* 9ct was repealed and replaced by the Collection 5ractices 9ct 1 +!>+" which was sli%htly amended in 1 !"# In passin% the 1 +! 9ct> the Le%islature voted a%ainst a provision a%ainst unreasonable oppression> harassment or abuse that contained a list of 10 prohibited practices applicable to all persons# 1hat survived the Le%islatureJs amendments was a list of prohibited practices for a%encies and collectors# This list is found in section 10 of the Collection 5ractices 9ct 1 !"# It is as follows:( @5F)5, 1o collection agency or collector shall " )a, enter into any agreement $ith a person for $hom he acts unless a copy of the form of agreement is filed $ith and approved by the AdministratorD use any form or form of letter to collect or attempt to collect a debt unless a copy of the form or form of letter is filed $ith and approved by the AdministratorD collect or attempt to collect money for a creditor e=cept on the belief in good faith that the money is due and o$ing by the debtor to the creditorD charge any fee to a person for $hom he acts in addition to those fees provided for in the form of agreement or in the information pertaining to fees filed $ith the AdministratorD if a collection agency/ carry on the business of a collection agency in a name other than the name in $hich he is licensed/ or invite the public to deal

)b,

)c,

)d,

)e,

3+ 3!

' 9 1 3*> c 10# Institute of Law Research and Reform Edmonton> 9lberta> cited above> at para%raph *#,# 9s above# ' 9 1 +!> c )+#

3 +"

!"

any$here other than at a place authoriMed by the licenceD )f, if a collector/ collect or attempt to collect a debt $ithout using his true name and the name of the collection agency that employs or authorises him to act as a collector/ as that collection agency2s name is sho$n on the collection agency2s licenceD collect from a debtor any amount greater than that prescribed by the regulations for acting for the debtor in ma ing arrangements or negotiating $ith his creditors on behalf of the debtor or receiving money from the debtor for distribution to his creditorsD ma e any arrangement $ith a debtor to accept a sum of money that is less than the amount of the balance due and o$ing to a creditor as full and final settlement $ithout the prior $ritten approval of the creditorD fail to provide any person for $hom he acts $ith a $ritten report on the status of that person2s account in accordance $ith the regulationsD ma e any personal call or telephone call for the purpose of demanding payment of a debt on any day e=cept bet$een 6A77 aAmA and 57A77 pAmA

)g,

)h,

)i,

)%,

)*,

Subsection )5, applies to a collection agency or collector not$ithstanding that he is collecting or attempting to collect a debt that has been assigned to him by a creditorA The Administrator may refuse to approve any form/ form of agreement or form of letter that he considers to be ob%ectionable and/ $ithout restricting the generality of the foregoing/ he may refuse any form/ form of agreement or form of letter that " )a, )b, )c, misrepresents the rights and po$ers of a person collecting or attempting to collect a debt/ misrepresents the obligations or legal liabilities of a debtor/ or is misleading as to its true nature and purposeA

)F,

)G,

8hen/ in the opinion of the Administrator/ a collection agency or collector is contravening or has contravened !1

any provision of this Act or the regulations/ the Administrator may issue an order directing that collection agency or collector/ as the case may be/ to " )a, )b, stop engaging in any practice that is described in the order/ and ta e such measures specified in the order that/ in the opinion of the Administrator/ are necessary to ensure that this Act or the regulations $ill be complied $ith/ $ithin the time specified in the orderAB

Ma%&la&( C#%&a
+#*0 In =ainland China> there is no national le%islation specifically dealin% with abusive debt collection activities# Relevant provisions touchin% on this matter can be found in the Criminal Law and the Civil 5rocedure Law of the 5eopleJs Republic of China# 9rticle ,0! of the Criminal Law provides that whoever unlawfully detains or confines another person in order to %et payment of a debt shall be punished in accordance with the offence of unlawful detention#+1 If ille%al distrainment of property is involved> 9rticle ,+" +, of the Criminal Law may be applicable# +#*) It should be noted that 9rticle 1"3 of the Civil 5rocedure Law relates to debt collection# The 9rticle provides that: @Decision on the adoption of compulsory measures against obstruction of proceedings shall be made only by the People2s CourtA Any unit or individual that e=torts repayment of a debt by illegal detention of a person or illegal distrainment of property shall be investigated for criminal responsibility according to the la$/ or shall be punished $ith detention or a fineAB The acts prohibited under 9rticle 1"3 of the Civil 5rocedure Law may call for criminal sanction or administrative penalty> dependent upon the seriousness of the acts#

Ot#!r 2ur%+(%*t%o&+
+#** 'in%apore> .ew Qealand and the Republic of Ireland do not have specific le%islation dealin% with debt collection a%encies or debt
+1

+,

9ccordin% to an Interpretation of the 'upreme 5eopleJs Court on this article on 0" June ,"""> the section is also applicable to demands for payment of unenforceable debts> for example> %amblin% and usury debts# 5ara%raph one of 9rticle ,+" provides that G1hoever unlawfully ta?es possession of another personJs money or property under his custody and refuses to return it> if the amount is relatively lar%e> shall be sentenced to fixed(term imprisonment of not more than two years> or criminal detention or be finedD if the amount is hu%e> or if there are other serious circumstances> he shall be sentenced to fixed(term imprisonment of not less than two years but not more than five years and shall also be finedH#

!,

collection practices#

!0

C#a"t!r : L%*!&+%&$ %& ot#!r 2ur%+(%*t%o&+

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

I&tro(u*t%o&
!#1 In the previous chapter> we examined different pieces of le%islation in other /urisdictions relatin% to debt collection activities# In many /urisdictions debt collection a%encies are also sub/ect to licensin% control#

U&%t!( K%&$(o/
!#, 8n 01 July 1 +)> the Consumer Credit 9ct 1 +) 6Gthe 9ctH7 was enacted and came into force on the same date# 9s stated in its preamble> the purpose of the 9ct is ( @to establish for the protection of consumers a ne$ system/ administered by the Director <eneral of (air Trading/ of licensing and other control of traders concerned $ith the provision of credit/ or the supply of goods on hire or hire" purchase/ and their transactions/ in place of the present enactments regulating money lenders/ pa$nbro ers and hire" purchase traders and their transactions/ and for related mattersBA !#0 The 9ct introduced a comprehensive re%ulatory re%ime by reFuirin% all proprietors of consumer credit businesses or consumer hire businesses to be licensed#1 By virtue of section 1)+617 of the 9ct> the licensin% reFuirements for a consumer credit business are extended to ancillary credit business# -ebt collection a%encies are reFuired to be licensed because they fall within the definition of ancillary credit business> , which includes ( 6a7 6b7 6c7 6d7 6e7 credit bro?era%e> debt(ad/ustin%> debt(counsellin%> debt(collectin%> or the operation of a credit reference a%ency#

!#) -ebt(collectin% is defined as the ta?in% of steps to procure payment of debts due under consumer credit a%reements or consumer hire

1 ,

'ection ,1# 'ection 1)*#

!)

a%reements#0 $owever> for the purpose of the 9ct> it is not debt(collectin% for a person to do anythin% in relation to a debt if: @)a, )b, he is the creditor or o$ner under the agreement/ other$ise than by virtue of an assignment/ or he is the creditor or o$ner under the agreement by virtue of an assignment made in connection $ith the transfer to the assignee of any business other than a debt"collecting business/ or AAAB)

!#* Barristers or advocates actin% in that capacity or solicitors en%a%in% in contentious business* are not to be treated as doin% so in the course of any ancillary credit business# 3

(riteri% for li$ensing

!#3 To obtain the necessary licence> the applicant must satisfy the -irector Ceneral of Aair Tradin% 6Gthe -irectorH7 that : 6a7 he is a fit person to en%a%e in the activities covered by the licence> and 6b7 the name under which he applies to be licensed is not misleadin% or otherwise undesirable# + !#+ In determinin% whether an applicant is a fit person to en%a%e in the activities concerned> the -irector must have re%ard to all relevant circumstances> and in particular any evidence tendin% to show that the applicant> his employees> a%ents or associates ! whether past or present have (
0

) *

3 + !

'ection 1)*6+7# 9 Gconsumer hire a%reementH is an a%reement made by a person with an individual 6Gthe hirerH7 for the bailment or 6in 'cotland7 the hirin% of %oods to the hirer> bein% an a%reement which ( 6a7 is not a hire(purchase a%reement> and 6b7 is capable of subsistin% for more than 0 months> and 6c7 does not reFuire the hirer to ma?e payments exceedin% S1*>"""# 'ee section 1*# Examples are bailment> leasin%> hirin% out or rentin% of %oods# $ire purchase a%reements are not included as they are consumer credit a%reements# 'ection 1)3637# 'ection !3617 of the 'olicitors 9ct 1 *+# GContentious businessH means business done> whether as solicitor or advocate> in or for the purposes of proceedin%s be%un before a court or before an arbitrator appointed under the 9rbitration 9ct 1 *"> not bein% business which falls within the definition of non(contentious or common form probate business contained in subsection 617 of section one hundred and seventy(five of the 'upreme Court of Judicature 6Consolidation7 9ct 1 ,*# 'ection 1)3617> 6,7# 'ection ,*617# The term GassociatesH is %iven a wide meanin%# 'ee section 1!)# Aor an individual> GassociatesH include spouse> former spouse> reputed spouse> relative> spouse of relative> business partner> spouse of business partner> and relative of business partner# GRelativeH means brother> sister> uncle> aunt> nephew> niece> lineal ancestor> and lineal descendant# Aor a body corporate> a body corporate is an associate of an individual if that individual is a controller of the body corporate> or if that individual and his associates to%ether are controllers of the body corporate# 9 body corporate is an associate of another body corporate ( 6a7 if the same person is a controller of both> or a person is a controller of one and persons who are his associates> or he and persons who are his associates> are the controllers of the otherD or 6b7 if a %roup of two or more persons is a controller of each company> and the %roups either consist of the same persons or could be re%arded as consistin% of the same persons by treatin% 6in one or more cases7 a member of either %roup as replaced by a person of whom he is an associate#

!*

@)a, )b,

committed any offence dishonesty/ or violence/

involving

fraud

or

other

contravened any provision made by or under this Act/ or by or under any other enactment regulating the provision of credit to individuals or other transactions $ith individuals/ practised discrimination on grounds of se=/ colour/ race or ethnic or national origins in/ or in connection $ith/ the carrying on of any business/ or engaged in business practices appearing to the Director to be deceitful or oppressive/ or other$ise unfair or improper )$hether unla$ful or not,AB

)c,

)d,

!#! If the applicant is a body corporate> the above considerations would be applied to the controller of the body corporate or an associate of such person#1" !# 5owers are also %iven to the -irector to renew> vary> suspend> and revo?e licences#11 The -irector has a duty to consider representations by applicants and licence(holders> who have a ri%ht of appeal to the 'ecretary of 'tate#1,

(rimin%l s%n$tions for oper%ting without % li$en$e

!#1" 5ursuant to section 0 617 of the 9ct> it is an offence to operate without a licence when one is reFuired# 5ursuant to section 1)+ of the 9ct> the criminal sanctions which apply to unlicensed consumer credit business also apply to unlicensed ancillary credit business which includes debt collection# If tried summarily> the offence carries a fine of up to S,>"""D and if tried on indictment> up to two yearsJ imprisonment andLor a fine can be imposed#10 It is also an offence for a licensee to carry on a business under a name not specified in the licence>1) or to fail to notify the -irector of chan%es in particulars entered in the re%ister within ,1 wor?in% days# 1*

1" 11 1,

10

1) 1*

'ection ,*6,7# 9s above# 'ections , (0,# The 'ecretary of 'tate here concerned is the 'ecretary of 'tate for Trade and Industry# 'ee Interpretation 9ct 1 +! section *> schedule 1# 'ee also section )1 of the 9ct# Aor a discussion of the appeals filed with the 'ecretary of 'tate> please see article by -avid Aoul?es in .ew Law Journal 6Aebruary 11> 1 !07 at pa%e 10*# 'ection 13+> and 'chedule 1# In . v Curr 61 !"7 , Crim 9pp R6'7 1*0 the defendant was sentenced to 1, monthsJ imprisonment and a fine of S,>)"" for six offences of carryin% on a consumer credit business without a licence> contrary to Consumer Credit 9ct 1 +)> section 0 617# 'ection 0 6,7# 'ection 0 607#

!3

(ivil s%n$tions for oper%ting without % li$en$e

!#11 The civil conseFuence of not obtainin% a licence is that any a%reement for the services of a person carryin% on an ancillary credit business13 6the GtraderH7> if made when the trader was unlicensed> is unenforceable a%ainst the other party 6Gthe customerH7 without an order of the -irector1+# $ence> a debt collector may not be able to collect his fees or commission without such an order from the -irector# The -irector must act /udicially and consider representations by the trader> as well as how far debtors have been pre/udiced# 1! <nless the -irector determines to issue an order that an a%reement for ancillary credit business is to be treated as if made when the trader was licensed> he must: 6i7 inform the trader that he is minded to refuse the application or %rant in terms different from those applied for> to%ether with his reasonsD and 6ii7 invite the trader to submit representations in support of the application# 1 The -irector must consider whether or not to %rant an order havin% re%ard to all relevant factors> includin%: @'n determining $hether or not to ma e an order under subsection )*, in respect of any period the Director shall consider/ in addition to any other relevant factors/ " )a, )b, )c, ho$ far/ if at all/ customers under agreements made by the trader during that period $ere pre%udiced by the trader2s conduct/ $hether or not the Director $ould have been li ely to grant a licence covering that period on an application by the trader/ and the degree of culpability for the failure to obtain a licenceAB,"

!#1, If any applicant is a%%rieved by the decision of the -irector> he may appeal to the 'ecretary of 'tate for Trade and Industry# ,1

Au+tral%a
!#10 Licensin% control systems over debt collectors are present in all 9ustralian /urisdictions except in the 9ustralian Capital Territory# ,,

13 1+ 1! 1 ," ,1 ,,

Includes debt collection# 'ection 1)!# Brian $arvey and -eborah 5arry> The !a$ of Consumer Protection and (air Trading > 60rd edition7 at pa%e ,30# 'ection 1)!607# 'ection 1)!6)7# 'ection 1*"# 9ustralian Law Reform Commission> .eport on Debt .ecovery and 'nsolvency> Report .o# 03 at para%raph ,!#

!+

N!9 Sout# Wal!+

!#1) The Commercial 9%ents and 5rivate InFuiry 9%ents 9ct 1 30 .o# ),0 provides for the licensin% and control of commercial a%ents> private inFuiry a%ents and their suba%ents# !#1* Commercial a%ent means any person 6whether or not the person carries on any other business7 who exercises or carries on any of the followin% functions> namely: 6a7 6b7 servin% any writ> summons or other le%al process> ascertainin% the whereabouts of> or repossessin%> any %oods the sub/ect of a lease> hire(purchase a%reement or bill of sale or ta?in% possession of any %oods the sub/ect of a mort%a%e within the meanin% of the Credit Act 1 !)> or collection> or reFuestin% or demandin% payment of debts>

6c7

on behalf of any other person and for or in consideration of any payment or other remuneration 6whether monetary or otherwise7> but does not include any employee of a licensed commercial a%ent# ,) !#13 Commercial suba%ent basically refers to one who wor?s for a commercial a%ent and carries out the functions of a commercial a%ent# 9 person who first /oins the industry may only apply as a suba%ent# 8nly after he has wor?ed for 1, months> and has underta?en certain trainin% courses> would he be eli%ible to apply for a licence as a commercial a%ent# !#1+ <nlicensed persons are prohibited from actin% as commercial a%ents or private inFuiry a%ents# 9n application for a licence may be lod%ed with the cler? of the Local Court for the district within which the applicant proposes to exercise or carry on the business of a commercial a%ent# <pon receivin% an application the court refers it to the local police for comment# The local police must then inFuire whether there are %rounds for ob/ectin% to the %rantin% of the application and forward a report to the cler? of the Local Court# !#1! 8b/ection may be made only on one or more of the followin% %rounds> namely: @)a, $here the applicant is a natural personH )i, )ii, that the applicant is not of good fame or character/ that the applicant is not a fit and proper person to hold a licence/ that the applicant does not have the prescribed
+#

)iii,
,0 ,)

Reprinted ," Aebruary 1 'ection )#

!!

qualifications or e=perience/ )iv, )v, that the applicant has not attained the age of 5+ years/ that/ e=cept in the case of an application for a subagent2s licence/ the applicant has not been continuously resident in Australia during the period of t$elve months immediately preceding the ma ing of the application/ that the applicant is disqualified under this Act from holding a licence/ that/ $ithin the period of 57 years immediately preceding the date of the application/ the applicant has been convicted of an offence punishable on indictment/ and

)vi, )vii,

)b,

$here the applicant is a corporationH )i, that any of the directors or the secretary of the corporation/ or any person employed as its manager to be in charge of the carrying out of its functions as the holder of a licence is a person referred to in subparagraph )i,/ )ii,/ )iv,/ )v,/ )vi, or )vii, of paragraph )a,/ or that the person to be in charge of the carrying out of its functions as the holder of a licence is a person*J referred to in subparagraph )iii, of paragraph )a,AB

)ii,

!#1 1here the local police ob/ects to the %rantin% of an application> the court would arran%e a hearin% by a ma%istrate> to be attended by both the applicant and a representative of the local police# The ma%istrate then ma?es his decision after the hearin%# !#," 9 licence> be it a commercial a%ent or suba%ent licence> is valid for 1, months> and upon expiry a fresh application has to be made# 1henever a licence is issued> both the local police and the Licensin% 5olice of the .'1 5olice are informed#

,*

'ection 1"637#

Li$ensing #oli$e,27 ES7 #oli$e

!#,1 Re%ulation of debt collection a%encies in .ew 'outh 1ales is also underta?en by the Licensin% 5olice of the .'1 5olice# The Licensin% 5olice is manned by a staff of about 1, and performs various functions includin%: 6a7 Investi%ative service ; to ensure the inte%rity of the industries involved is maintained and to identify any involvement of or%ani:ed crime within those industries# Consultancy 'ervice ; providin% advice to other Covernment departments and authorities on liFuor licensin%> le%ali:ed %amin%> racin% and filmLliterature classification# Index of Licensees ; the a%ency is responsible for maintainin% a re%ister of persons who are licensed under the Commercial 9%ents and 5rivate InFuiry 9%ents 9ct 1 30# 9ny member of the public may peruse the re%ister with re%ard to the issue> renewal or cancellation of licences concernin% commercial a%ents and their suba%ents#

6b7

6c7

!#,, The control of commercial a%ents in some other states of 9ustralia is underta?en by other statutory bodies# In Pueensland> for example> the administration of the licensin% re%ime is handled by the 8ffice of Aair Tradin%# In 'outh 9ustralia> the same wor? is underta?en by the 8ffice of Consumer and Business 9ffairs#

6eview of the present ES7 legisl%tion

!#,0 The Licensin% 5olice does not see any ma/or problems with debt collection a%encies and believes the le%islation has wor?ed satisfactorily# 9s> however> the le%islation was enacted in 1 30> it is now considered not entirely up to date and improvements may be made# The Commercial 9%ents and 5rivate InFuiry 9%ents 9ct 1 30 is bein% reviewed> and draftin% of the bill is under way# In the meantime> the 1 30 9ct is still current# !#,) It is> however> understood that the bill will ma?e> inter alia> the followin% chan%es: 6a7 6b7
,3

The issuin% authority of a licence is to remain with the Licensin% Court#,+ To address some %rey areas relatin% to the conduct of some

,+

Aormerly called the Licensin% 9%ency> the Licensin% 5olice belon%s to the KCrimes 9%encies : 8r%anised Crime 6Camin% and LiFuor7J unit> which is responsible for the Commercial 9%ents and 5rivate InFuiry 9%ents 9ct 1 30# Incidentally> one of the duties of the <nit is to ta?e part in the establishment of a 'tate Licensin% Council# Information on this part is provided by the $on% &on% 5olice# 9t earlier sta%e> it was contemplated that the issuin% authority should be chan%ed from the Court to the Commissioner of .ew 'outh 1ales 5olice#

"

commercial a%ents and suba%ents# 6c7 To improve the procedures dealin% with complaints filed a%ainst commercial a%ents and suba%ents#

D%*tor%a
!#,* The 5rivate 9%ents 9ct 1 33 was ori%inally introduced in 4ictoria in 1 *3 to re%ulate inFuiry a%ents> private detectives> and security %uard companies# The 9ct was then broadened and currently establishes occupational re%ulation on the debt recovery and private security industries# The current le%islation includes six cate%ories of private a%ents which are reFuired to be licensed: 6a7 6b7 6c7 6d7 6e7 6f7 Gcommercial a%entH> which includes a debt collector andLor repossession a%entD Gcommercial suba%entH> which includes an employee or person actin% on behalf of a commercial a%entD Gcrowd controllerH> colloFuially ?nown as a bouncerD Gsecurity %uardH> i#e# a person paid to watch or protect propertyD Gsecurity firmH> i#e# a person or partnership supplyin% security %uards andLor crowd controllersD and GinFuiry a%entH> colloFuially ?nown as a private detective#

!#,3 5art II of the 1 33 9ct prohibits any person from actin% as a commercial a%ent or commercial suba%ent> unless licensed# It also prohibits a commercial a%ent from employin% any unlicensed commercial suba%ent# Corporations or partnerships see?in% a commercial a%entJs licence are reFuired to appoint as nominee the officer or person residin% in 4ictoria who is in bona fide control of the business in 4ictoria# !#,+ 9n application for a commercial a%entJs or suba%entJs licence 6which may be made by an individual or corporation7 must be made in triplicate to the =a%istratesJ Court in the prescribed form# It must be accompanied by three testimonials in duplicate si%ned by different reputable persons as to the character of the applicant> or the nominee in the case of the corporation or firm> and be accompanied by three passport(si:ed photo%raphs# 9n application for a commercial a%entJs licence must be accompanied by proof that a surety has been or will be lod%ed as reFuired by -ivision 1 of 5art I4 of the 9ct# !#,! The Re%istrar at the relevant =a%istrateJs Court is reFuired to forward a duplicate of the application to the officer in char%e of the police station nearest to that Court for investi%ation and report# 9ny person is entitled to ob/ect on the %rounds specified in the 9ct> which essentially mirror those matters to be ta?en into account by the Court in considerin% the %rant or refusal of the licence# These matters include issues of a%e> character and competency#

!#, 9 commercial a%entJs or suba%entJs licence remains in force for one year and may> sub/ect to satisfaction by the Court and payment of the renewal fee> be renewed without the applicant havin% to personally attend before the court# !#0" The 9ct further provides that upon application by any person> a commercial a%ent or suba%ent may be called on to attend before the court and show cause not only why the licence should not be cancelled> but why permanent or temporary disFualifyin% orders ou%ht not be made# The %rounds on which such an application may be lod%ed include those on which an initial %rant is made#

Simil%r Legisl%tion
!#01 8ther states in 9ustralia have similar le%islation for the re%ulation of commercial a%ents# 9lso> under mutual reco%nition le%islation> commercial a%ents and suba%ents re%istered in one /urisdiction may be able to obtain re%istration in another /urisdiction throu%h an administrative process# !#0, The 9ustralian Law Reform Commission,! has compiled a summary of the licensin% criteria in the different states: 6a7 6b7 9%e reFuirements# 6Cenerally reFuired7# Residence reFuirements# 6.ew 'outh 1ales> Pueensland> 'outh 9ustralia and the .orthern TerritoryD in .ew 'outh 1ales> the residence need only be in 9ustralia7# 9n applicant should be of %ood fame and character and be a fit and proper person to hold a licence> and must not have been convicted of certain offences or disFualified from holdin% a licence# 6Cenerally reFuired7# 9deFuacy of educational attainments or experience# 6ReFuired in .ew 'outh 1ales> Pueensland> 'outh 9ustralia and Tasmania# But there are no trainin% or examination reFuirements in any 'tate or Territory7# .o previous record of harassment of debtors# 6In .ew 'outh 1ales> 4ictoria and Tasmania> such a record is a %round for refusal of a licence7# -isFualification for ban?ruptcy# 6In 4ictoria> Tasmania and the .orthern Territory> applicants must not be ban?rupt# In other /urisdictions> ban?ruptcy or entry into a composition or scheme of arran%ement with creditors is a %round for discipline7#

6c7

6d7

6e7

6f7

,!

Report on -ebt Recovery and Insolvency> cited above#

!#00 Licensin% applications are> however> handled by different bodies in different 'tates: .ew 'outh 1ales ( 9pplication is lod%ed with the cler? at the Local Court for the district# The matter is then referred to the police for inFuiry and report# 9ny ob/ection relatin% to the %rant of a licence is heard by a stipendiary ma%istrate in open court#, Pueensland ( 9pplication is lod%ed with the 9uctioneers and 9%ents Committee> an administrative body#0" The Committee consists of a re%istrar and ! other members appointed by the Covernor in Council# The Committee has dele%ated its licensin% powers to a sub(committee which conducts bac?%round chec?s on the applicant with the police# 9ny ob/ection will be lod%ed with the -istrict Court# The administration of the licensin% re%ime is handled by the 8ffice of Aair Tradin%# 'outh 9ustralia ( 9pplication is lod%ed with the 8ffice of Consumer and Business 9ffairs> and any ob/ection will be heard by the -istrict Court# 01 The police are responsible for conductin% criminal record chec? on the applicant# 4ictoria - 9lthou%h an administrative body has been established> application decisions are made by the courts# 0, The arran%ement is similar to that of .ew 'outh 1ales# 1estern 9ustralia - The arran%ement is similar to that of .ew 'outh 1ales and 4ictoria# There is a Commercial 9%ents 'Fuad within the 1estern 9ustralia 5olice# .orthern Territory - 9pplication is lod%ed with the 8ffice of Court# Copy of the same is forwarded to the police> the 'olicitor for .orthern Territory> and will be %a:etted# The 8ffice of Court maintains the licence re%ister# Tasmania - 9pplication is lod%ed with the Court of 5etty 'essions# The Cler? of Court handles the basic administration of the licence# 9 ma%istrate has the power to revo?e a licence upon a complaint made a%ainst the licensee#

, 0" 01 0,

Commercial 9%ents and 5rivate InFuiry 9%ents Re%ulation 1 Commercial 9%ents and 5rivate InFuiry 9%ents 9ct 1 30 6.'17 section 1"# 9uctioneers and 9%ents 9ct 1 +1 6Pld7 section 1+# 'ecurity and Investi%ation 9%ents 9ct 1 *# 5rivate 9%ents 9ct 1 33 64ic7 sections !> 11> 10#

* under the

Ca&a(a
*l?ert%
!#0) In 9lberta> as early as 1 3*> debt collection a%encies and individual debt collectors wor?in% as employees of the a%encies were reFuired to be licensed pursuant to the Collection 9%encies 9ct 1 3*# 00 In 1 +!> the 1 3* 9ct was repealed and replaced by the Collection 5ractices 9ct 1 +! which was sli%htly amended in 1 !"# In the Collection 5ractices 9ct 1 !"> there are provisions %overnin% the licensin% of debt collectors# 9n 9dministrator of Collection 5ractices 6the G9dministratorH7 is appointed under section , to administer the implementation of the 9ct# !#0* 9 collection a%ency and a collector must have a licence before embar?in% on the business of a collection a%ency and actin% as a collector respectively#0) .o collection a%ency can employ or authorise any person who does not have a licence as a collector# Certain cate%ories of persons are exempted under the 9ct# They include barristers and solicitors in practice and civil enforcement bailiffs# !#03 GCollection a%encyH is defined 0* to mean Ga person> other than a collector> who carries on the business 6i7 of collectin% or attemptin% to collect debts for other persons> 6ii7 of collectin% or attemptin% to collect debts under any name which differs from that of the creditor to whom the debt is owed ###H# GCollectorH is defined03 as Ga person employed or authori:ed by a collection a%ency to 6i7 collect or attempt to collect money R 6iv7 deal with or locate debtors> for the collection a%ency RH# !#0+ 9n application for the %rant or renewal of a collection a%ency licence or collectorJs licence has to be made to the 9dministrator in the prescribed form to%ether with the licence fee> security and affidavit 6in the case of a collection a%ency licence7 or employmentLauthori:ation letter 6in the case of a collectorJs licence7# !#0! 9ny person who has been refused a licence or the renewal of a licence or whose licence has been cancelled or suspended may appeal 0+ to the =inister who appoints an appeal board to hear the appeal# The appeal board consists of an independent person appointed by the =inister as the chairman and other persons who are licensed under the 9ct# The appellant or the 9dministrator may appeal a%ainst the decision of the appeal board to the Court of PueenJs Bench# !#0 Before issuin% or renewin% a licence> the 9dministrator may ma?e inFuiries re%ardin% the applicant and each partner of the partnership or each director of the corporation# 5ursuant to section 1*6,7> the 9dministrator may refuse to issue or renew a licence or may suspend or cancel a licence if
00 0) 0* 03 0+

' 9 1 3*> c 10# 'ection )# 'ection 16b7# 'ection 16c7# 'ection 13#

the applicant or licensee ( 6a7 6b7 6c7 ma?es an untrue statement or a material omission ?nowin%lyD refuses or ne%lects to comply with this 9ctD in the opinion of the 9dministrator> is not a financially responsible person> or in view of his past record> the 9dministrator considers it appropriate in the public interest#

!#)" The 9dministrator has statutory powers to investi%ate and ma?e inFuiries# The 9dministrator may inFuire into any complaint or alle%ed contravention of the 9ct> and reFuire any person to provide any information he considers relevant#0! In addition> the 9dministrator may inFuire into the affairs of any person who is believed to en%a%e in the business of debt collectin%# 0 $e may also apply to court for an order to enter relevant premises to search> examine> remove> ta?e extracts from or obtain copies of any records> boo?s> document or thin%s which are relevant# 9 certified true copy of a record> boo? or document obtained under this section shall be admissible in evidence in a court# !#)1 Collection a%encies are reFuired to ?eep proper accountin% and other records of the business includin% a re%ister of the trust accounts into which all money collected from debtors is paid# )" Collection a%encies must ac?nowled%e the receipt of any money collected from debtors by means of consecutively numbered vouchers containin% details such as the date the amount was received and the names of debtors# !#), Collection a%encies are also reFuired to deposit all money collected from debtors in trust accounts maintained in ban?s> loan corporations> trust corporations> etc# )1 Collection a%encies cannot withdraw money from trust accounts except for the purpose of payin% creditors or deductin% the commission and disbursements of the collection a%encies> etc# !#)0 Collection a%encies are further reFuired to provide the 9dministrator with reports of their financial affairs si%ned by acceptable auditors> and also provide the auditors with access to boo?s and records of the businesses#), The 9dministrator may order a collection a%ency to correct any defect or deficiency in the form or maintenance of any boo? or record#

Sout# A'r%*a
!#)) In 'outh 9frica> the -ebt Collectors 9ct 1 ! re%ulates the licensin% of debt collectors# G-ebt collectorH is defined )0 to mean a person ( 6a7
0! 0 )" )1 ), )0

other than an attorney or his employee> who for reward collects

'ection 1 # 'ection ,"# 'ection # 'ection 1"# 'ection 11# 'ection 1#

6b7 6c7

debts owed to another on the latterJs behalfD who> in the course of his business> for reward ta?es over debts referred to above in order to collect them for his own behalfD who> as an a%ent or employee of a person referred to in 6a7 or 6b7> collects the debts on behalf of such person#

!#)* 9 Council ?nown as the Council for -ebt Collectors 6the GCouncilH7 is established to exercise control over the occupation of debt collectors# <nder section 0> the Council shall consist of not more than 1" members appointed by the =inister of Justice> includin% ( 6a7 6b7 6c7 6d7 6e7 a chairperson> any fit and proper person with a suitable de%ree of s?ill and experience in the administration of civil law mattersD an attorneyD , to ) debt collectors> , of whom> bein% natural persons with at least 0 years experience> shall be appointed after consultin% the trade of debt collectorsD , persons> in the opinion of the =inister of Justice> bein% fit and properD a person nominated by institutions representin% consumer interests and whom the =inister of Justice is satisfied is a fit and proper person#

!#)3 The Council may appoint 0 of its members as an executive committee of the Council to perform or exercise all the powers and functions of the Council durin% the periods between meetin%s of the Council# )) The Council may also under section + appoint such personnel for the efficient performance of its functions and mana%ement# !#)+ 9ccordin% to section !> no person can act as a debt collector unless he is re%istered under the 9ct as a debt collector# 9n attorney or his employee is exempted from the 9ct# In the case of a company or close corporation carryin% on business as a debt collector> apart from the company or corporation itself> every director of the company> member of the corporation and every officer of such company or corporation concerned with debt collectin%> must also be re%istered as debt collectors under the 9ct# 9ny person who contravenes this section is %uilty of an offence and liable on conviction to a fine or imprisonment for 0 years# The =inister of Justice may exempt any person from the provisions of the 9ct# !#)! 9n application for re%istration as a debt collector shall be lod%ed with the Council in the prescribed form and with the prescribed fee# 9 person can be disFualified from re%istration in any of the followin% circumstances )* ( 6a7 6b7 6c7 convicted of an offence with violence> dishonesty> extortion or intimidation as an element in the precedin% 1" yearsD %uilty of improper conductD unsound mind and so declared or certified by a competent authorityD
'ection *# 'ection 1"#

)) )*

6d7 6e7 6f7

under the a%e of 1! yearsD unrehabilitated insolventD or in the case of a company or close corporation> a director of the company or a member of the corporation is so disFualified from re%istration in the above terms#

!#) The Council is reFuired to ?eep a re%ister of the name and prescribed particulars of every debt collector> and publish it in the Ca:ette and allow the public to inspect it# !#*" The Council is also empowered> sub/ect to the approval of the =inister of Justice> to adopt a code of conduct for debt collectors which is bindin% on all debt collectors and publish that code in the Ca:ette# )3 The Council may> sub/ect to the approval of the =inister of Justice> amend or repeal the code# 'ection 1* sets out certain conduct which may be re%arded by the Council to be improper conduct> for example ( 6a7 6b7 6c7 6d7 6e7 usin% force or threatenin% to use force a%ainst a debtorD actin% towards a debtor in an excessive or intimidatin% mannerD ma?in% fraudulent or misleadin% representationsD spreadin% or threatenin% to spread false information concernin% the creditworthiness of a debtorD contravenin% or failin% to comply with any provisions of the 9ctD etc#

!#*1 The Council may investi%ate any alle%ation of improper conduct of a debt collector# The debt collector may refute such alle%ation either in person or throu%h a le%al representative#)+ If the Council finds a debt collector %uilty of improper conduct> the Council may ( 6a7 6b7 6c7 6d7 6e7 6f7 6%7 withdraw his re%istrationD suspend his re%istrationD impose on him a fineD reprimand himD recover from him the costs incurred by the Council in connection with the investi%ationD order him to reimburse any person whom the Council is satisfied has been pre/udiced by the conduct of such debt collectorD any combination of the above#

!#*, The Council may withdraw the re%istration of a debt collector if he has %iven false information in his application for re%istration> or after his re%istration> he ( 6a7 6b7 6c7 6d7
)3 )+

is convicted of an offence of which violence> dishonesty> extortion or intimidation is an elementD is found %uilty in terms of section 1* of improper conductD becomes of unsound mind and is so declared or certified by a competent authorityD becomes insolventD or
'ection 1)# 'ection 1*#

6e7

in the case of a company or close corporation> the re%istration of a director of the company or a member of the corporation is so withdrawn in the above terms#)!

!#*0 -ebt collectors may only recover from a debtor the capital amount of a debt and any interest le%ally due and any necessary expenses and fees# ) -ebt collectors are reFuired under section ," to deposit the money received from debtors into a separate trust account and pay such money and interest to the person on whose behalf the money is received within a reasonable time# *" -ebt collectors are also reFuired to ?eep proper accountin% records in respect of all money received and the accountin% records and annual financial statements are reFuired to be audited annually by a person appointed by the Council#*1

)! ) *" *1

'ection 13# 'ection 1 # 'ection ,"# 'ection ,1#

C#a"t!r ; Co&+u/!r *r!(%t (ata

,,,,,,,,,,,,,,,,,,,,,,,,,,,,

I&tro(u*t%o&
#1 It has been su%%ested that indiscriminate lendin% and the proliferation of credit cards and other forms of credit have contributed towards the defaults by many debtors> which have> in turn> led to an increase in abusive debt collection activities# Civen the hi%h profit mar%in of the credit card business and other forms of credit facilities> lenders are willin% to accept hi%h ris?s in extendin% credit> which tends to lead to hi%her default rates be%ettin% unscrupulous debt collection activities# #, Ainancial institutions> on the other hand> maintain that> as a result of the operation of the 5ersonal -ata 65rivacy7 8rdinance and the Code of 5ractice on Consumer Credit -ata> they do not have access to important information relatin% to an individualJs creditworthiness which is made available in other mar?ets such as the <nited &in%dom and the <nited 'tates by credit reference a%encies or credit bureaux#

P!r+o&al Data APr%4a*yB Or(%&a&*!

(o+e of #r%$ti$e on (onsumer (re+it -%t%
#0 In $on% &on%> the handlin% of consumer credit data is sub/ect to the Code of 5ractice on Consumer Credit -ata 6Gthe CodeH7# The Code is issued by the 5rivacy Commissioner for 5ersonal -ata pursuant to the powers conferred on him by 5art III of the 5ersonal -ata 65rivacy7 8rdinance 6Cap )!37# The Code first too? effect in .ovember 1 !# 9 revision of the Code was completed recently and too? effect in =arch ,"",# 1 #) The Code comprises %uidelines to data users in the handlin% of consumer credit data> includin% the collection and use of personal data of individuals who are> or have been> applicants for consumer credit# The Code covers> on the one hand> credit reference a%encies> , and on the other hand>
1 ,

'ee para%raphs *#1, ; *#1) for other provisions of the Code# KCredit reference a%encyJ is defined in the Code of 5ractice on Consumer Credit -ata as Gany data user who carries on a business of providin% a consumer credit reference service> whether or not that business is the sole or principal activity of that data userH# KConsumer credit reference serviceJ is defined as Gthe service of compilin% andLor processin% consumer credit data> includin% consumer credit scorin%> and disseminatin% such data to a credit providerH# In other words> the business of a credit reference a%ency is to compile a central credit database usin% the data supplied to it by its member credit providers> and then supply the processed credit data to its member credit providers in response to their reFuests pursuant to specific credit applications they have received#

credit providers0 in their dealin% with credit reference a%encies and debt collection a%encies# #* 9part from the types of personal data listed in clause ,#1 ) of the Code> a credit provider should not provide> and a credit reference a%ency should not collect> any other types of consumer credit data# 8ne conseFuence of these restrictions is that> credit providers in $on% &on% do not have reliable information on the debt to income ratio of individuals applyin% for credit>* and such limitations have made it difficult for ban?s to ma?e informed decisions on the credit exposure of applicants# 9lso> information on the repayment manner of individuals is not allowed to be collected by a credit reference a%ency and shared with other credit providers# Aor example> if a debtor chooses to repay only the minimum repayment amount of *I of his credit card debts each month> this repayment information will not be available to other lenders# 'ome debtors have therefore relied on applyin% for new credit to repay the minimum repayment amount> until their indebtedness have built up to unmana%eable amounts#

S#ar%&$ o' "o+%t%4! *r!(%t (ata %& ot#!r 2ur%+(%*t%o&+

#3 The table below is a %eneral %uide to the ?inds of positive credit 3 data on individuals that are available to credit providers in other /urisdictions:

$ere means 6i7 an authori:ed institution within the meanin% of section , of the Ban?in% 8rdinance 6Cap 1**7D 6ii7 a subsidiary of an authori:ed institutionD 6iii7 a money lender licensed under the =oney Lenders 8rdinance 6Cap 1307D and 6iv7 a person whose business 6whether or not the person carries on any other business7 is that of providin% finance for the acFuisition of %oods by way of leasin% or hire purchase# These include %eneral particulars of an individual> account default data reported by a credit provider> public record data> credit application data> credit card loss data> char%e data> watch list data> file activity data and credit score data# The latter two types of data are discussed in para%raphs 1"#!) ; 1"#!+# 9lthou%h the lenders can reFuest credit applicants to disclose their total credit exposure durin% a credit application> information obtained this way is not re%arded by lenders as reliable as lenders cannot find out whether the disclosure is full and accurate# Credit information provided by other lenders and processed by credit reference a%encies> on the other hand> is re%arded as reliable# 5ositive credit data are data relatin% to the financial circumstances of individuals that do not involve a failure to repay# Examples are an individualJs overall income or credit exposure and repayment records# .e%ative credit data are %enerally data relatin% to a failure by an individual to meet his obli%ations with re%ard to a financial liability# Examples are failure to repay a loan# Arom a privacy point of view> it is %enerally acceptable for ne%ative data to be collected for credit reference services#

1""

9%%re%ate credit exposure NInformation on each active loan includin% mort%a%e> instalment loans 6li?e personal loans> tax loans> hire purchase7 and revolvin% loans 6li?e credit cards and overdraft facilities7O Ceneral repayment manner6h7 6a7

Ees6f7

Ees

Ees

.o

.o6%7

Ees6i7

Ees6/76?7

Ees6/7

.o

.o

6b7

6c7 6d7 6e7 6f7 6%7

6h7
6i7 6/7 6?7

The lenderJs copy of the credit report does not show which company has accessed the information> but lenders can see what type of credit was involved e#%# personal loan> mort%a%e> credit card or char%e card# .ames are shown on the individualJs copy of credit report# The lenderJs copy shows also the names of those who have accessed the information> provided the transactions or activities were initiated by the individual# 8n the individualJs copy of the credit report> addresses of those who have accessed the information are also included# But only for the past * yearsD cannot disclose whether application was successful# Extended from " days to * years since =arch ,"",# The balance on a credit card and the minimum payment due will be shown# The outstandin% credit balance will be shown thou%h not all mort%a%e providers will input information# Information on leasin% and hire(purchase transactions is available# Information on %eneral repayment manner is also available in Cermany#+ =onths(past(due information is shown in the report# -ays(past(due information for a number of previous months are shown in the report# =onthly payment amount and payment pattern durin% the past several years are shown#

#+ 9s shown in the table> $on% &on% is rather conservative in terms of sharin% of positive consumer credit data as compared to the <nited 'tates> Canada and the <nited &in%dom> but is similar to 9ustralia in this re%ard#

IS 1%ir (re+it 6eporting *$t

#! In the <nited 'tates> the importance attached to credit reportin% is spelt out in the <' Aair Credit Reportin% 9ct# The preamble to the <' Aair Credit Reportin% 9ct provides that:

http:LLwww#experian#comLcorporateLpress(releasesL"3"L !#html#

1"1

@)5,

The ban ing system is dependent upon fair and accurate credit reportingA 'naccurate credit reports directly impair the efficiency of the ban ing system/ and unfair credit reporting methods undermine the public confidence $hich is essential to the continued functioning of the ban ing systemA An elaborate mechanism has been developed for investigating and evaluating the credit $orthiness/ credit standing/ credit capacity/ character/ and general reputation of consumersA Consumer reporting agencies have assumed a vital role in assembling and evaluating consumer credit and other information on consumersA There is a need to insure that consumer reporting agencies e=ercise their grave responsibilities $ith fairness/ impartiality/ and a respect for the consumer2s right to privacyAB

)*,

)F,

)G,

# Credit reference a%encies are usually referred to as credit bureaux in the <nited 'tates# The types of positive credit information that can be collected and stored are numerous if compared to $on% &on%# They include specific information about each account such as the date opened> credit limit or loan amount> balance> monthly payment amount> and payment pattern durin% the past several years# The credit report may also state whether anyone else besides the individual concerned is responsible for payin% the account# Information collected by the credit bureaux may include even overdue child support payments# #1" The Aair Credit Reportin% 9ct stipulates that a credit report can be obtained only in the followin% situations:

in accordance with the individualJs written instructions in response to a court order or federal %rand /ury subpoena to mana%e the ris? of current or potential credit or insurance accounts that were initiated by the individual for employment purposes such as hirin% or promotin%> with the individualJs written permission

1",

in connection with the individualJs application for a licence or other benefit %ranted by the %overnment> when consideration of financial responsibility is reFuired by law in connection with a business transaction initiated by the individual in connection with a child support determination> under certain circumstances in connection with a credit or insurance transaction initiated by the individual> when a Gfirm offerH of credit or insurance is extended and certain other restrictions are met by the ABI in connection with issues such as counter( intelli%ence

#11 Individuals in the <nited 'tates have access to their own data collected by the credit bureaux# 9ccess to oneJs own data costs about <'M! in most states> and a credit report will be made free of char%e if the individual is unemployed> on public assistance> has been denied credit within the last 3" days> is suspected to be a victim of fraud> or is resident of a state that reFuires credit reportin% a%encies to provide one or more complimentary reports annually#

IS E@u%l (re+it Opportunit& *$t

#1, This 9ct reFuires the credit provider to %ive reasons for refusin% a credit application if the individual reFuests such information# Aor example> the creditor must specify whether credit was denied because an individual has Gno credit fileH with a credit bureau> or the credit bureau reports that the individual has GdelinFuent obli%ationsH# The 9ct also reFuires credit providers to consider additional information which the individual may supply about his credit history#

*ustr%li%n (ommonwe%lth #riv%$& *$t

#10 Consumer credit information in 9ustralia is re%ulated by the Commonwealth 5rivacy 9ct 1 !! althou%h the main thrust of the 9ct is to lay down privacy safe%uards which the %overnment must observe when collectin%> storin%> usin% and disclosin% personal information#

1"0

#1) 9s from 1 "> the privacy aspects of credit reportin% and data matchin% were overseen by the 5rivacy Commissioner# <nder s# 1!9 of the 9ct> the 5rivacy Commissioner issues a Code of conduct for credit reportin%# <nli?e the relevant Code in $on% &on%> the Code of conduct for credit reportin% formulated by the 5rivacy Commissioner in 9ustralia is le%ally bindin%# #1* 5art III9 of the 5rivacy 9ct provides safe%uards for individuals in relation to consumer credit reportin%# In particular> 5art III9 %overns the handlin% of credit reports and other credit worthiness information about individuals by credit reportin% a%encies and credit providers# The 9ct ensures that the use of this information is restricted to assessin% applications for credit lod%ed with a credit provider and other le%itimate activities involved with %ivin% credit# The le%islation does not directly affect commercial credit information# #13

The ?ey reFuirements of 5art III9 include: 'trict limits on the type of information which can be held on a personJs credit information file by a credit reportin% a%ency> and on the len%th of time the information can be held on file# Limits on who can obtain access to an individualJs credit file held by a credit reportin% a%ency# Cenerally only credit providers may obtain access and only for specified purposes# Real estate a%ents> debt collectors> employers> %eneral insurers are barred from obtainin% access# Limits on the purposes for which a credit provider can use a credit report obtained from a credit reportin% a%ency# These include:

to assess an application for consumer credit or commercial credit 6but they must see? consent if they are usin% the individualJs consumer credit report to assess an application for commercial credit> or usin% the individualJs

1")

commercial credit report to assess an application for consumer credit7 to assess whether to accept a person as %uarantor for a loan applied for by someone else to collect overdue payments

5rohibition on disclosure by credit providers of credit worthiness information about an individual> includin% a credit report received from a credit reportin% a%ency> except in specified circumstances# These include:

where the disclosure is to another credit provider and the individual has %iven consent to a mort%a%e insurer to a debt collector 6but credit providers can only %ive limited information contained in or derived from a credit report issued by a credit reportin% a%ency7

Ri%hts of access and correction for individuals in relation to their own personal information contained in credit reports held by credit reportin% a%encies and credit providers#

Inite+ 0ing+om -%t% #rote$tion *$t D559

#1+ The <& -ata 5rotection 9ct 1 ! came into force on 1 =arch

1"*

,"""#! The 9ct is administered and enforced by the Information Commissioner who has a ran%e of duties includin% the promotion of %ood information handlin% and the encoura%ement of codes of practice for data controllers> that is> anyone who decides how and why personal data are processed# #1! -ebtors are afforded certain ri%hts to information under the Consumer Credit 9ct 1 +)> the -ata 5rotection 9ct 1 ! and the Consumer Credit 6Credit Reference 9%ency7 Re%ulations ,"""# Aor example> on receipt of the debtorJs written reFuest> the creditor has the duty to disclose the name and address of the credit reference a%ency from which information about the debtorJs financial standin% has been obtained# 1" 9s for the credit reference a%ency> it also has the duty to disclose filed information to the debtor# 11 If a debtor finds that the filed information is not correct> there are mechanisms to correct the information#1, The above provisions are supplemented by Consumer Credit 6Credit Reference 9%ency7 Re%ulations ,""" which prescribe further details10 to the relevant sections#

Situ%tion in Hong 0ong

#1 Credit Information 'ervices Ltd 6GCI'H7 is the only ma/or consumer credit reference a%ency operatin% in $on% &on%# CI' was formed by co(operation between finance houses and ban?s# 1) The database of CI' had %rown to over one million records by 1 !> about two thirds of which were in respect of individuals# In 1 !> over two million enFuiries were made throu%h CI' by its members> and the same number of credit reports was produced for the year# #," 617 Credit reports may include the followin% information: 1* Ceneral particulars> includin% name> sex> address> contact information> date of birth> $on% &on% identity card number or

1" 11 1, 10 1)

1*

The 1 ! 9ct replaced the 1 !) -ata 5rotection 9ct to %ive effect to the 1 * EC -ata 5rotection -irective 6 *L)3LEC7# The -ata 5rotection Commissioner is renamed as Information Commissioner by virtue of the Areedom of Information 9ct ,"""# 'ection 1*+ Consumer Credit 9ct 1 +)# 'ection 1*! Consumer Credit 9ct 1 +) 6as amended by section 3, of the -ata 5rotection 9ct 1 !7# 'ection 1* Consumer Credit 9ct 1 +)# Aor example> the number of days durin% which the application for information must be complied with> and the manner in which the application must be made# CI' was established in 1 !, by 1, finance houses which were the ma/or players in the vehicle and eFuipment financin% mar?et# 9t that time> serious frauds were committed in relation to collateral financin% and the need was seen for a centralised database to be created in order to curb double or multiple financin%# Cradually> the database of CI' expanded to include ne%ative default data# In the late 1 !"Js> with the development of unsecured credit li?e the credit card business> the importance of the central database %rew and ma/or credit card companies and ban?s /oined as CI' shareholders# CI' members provide information on delinFuent accounts to CI' on a monthly basis# In respect of the collection of consumer credit data> certain restrictions are imposed by the Code of 5ractice on Consumer Credit -ata# 5lease refer to clause ,#1 of the Code of 5ractice on Consumer Credit -ata Aeb ,"", for details#

1"3

travel document numberD 6,7 9ccount default data reported by a credit provider with details of the credit provider> date of default> type of account and the total amount owin% on the accountD 5ublic record> bein% writs for the recovery of debts> /ud%ments for monies owed> and dischar%e of ban?ruptcyD Credit application data reported by a credit provider includin% the type and amount of credit sou%ht> the date of application> and the name of the credit providerD Credit card loss data reported by a credit card issuer> bein% notice that the card issuer has suffered loss as the result of unauthori:ed transaction> and details of the eventD Leasin% and hire(purchase data> includin% data as to motor vehicle or eFuipment leasin% or hire(purchase transactions includin% the value and other details of the %oodsD

607 6)7

6*7

637

1"+

6+7

1atch list data> that is> listin% of credit providers who wish to be notified to assist in debt collection if an individual has reappeared in the systemD Aile activity data> that is> record of a credit provider accessin% an individualJs personal data held by the credit reference a%encyD Credit score data> that is> the score that results from applyin% consumer credit scorin%13 to an individualD Char%e data in respect of the creation and termination of a char%e over eFuipment> vehicles or vessels#

6!7 6 7 61"7

13

Consumer credit scorin% means the process whereby personal data relatin% to an individual held in the record system of a credit reference a%ency 6bein% information statistically validated to be predictive of future payment behaviour or the de%ree of ris? of delinFuency or default associated with the provision or continued provision of consumer credit7 are used> either separately or in con/unction with other information held in the system> for the purpose of %eneratin% a score to be included in a credit report on the individual#

1"!

#,1 It should be noted that CI' credit reports> albeit informative> cannot %ive a complete picture of an applicantJs credit position because: first> not all lenders have chosen to participate in the sharin% of information throu%h credit reference a%encies with re%ard to all types of consumer creditD and second> due to privacy concerns> limitations are placed on the type of information that is %athered#1+ #,, Chan%es have ta?en place since the publication of the 'ub( committeeJs Consultation 5aper with re%ard to the sharin% of consumer credit data# These will be discussed in Chapter 1"#

1+

9part from the data listed in clause ,#1 of the Code of 5ractice on Consumer Credit -ata ,"",> other types of consumer credit data cannot be collected#

1"

C#a"t!r -0 Pro"o+al+ 'or r!'or/

,,,,,,,,,,,,,,,,,,,,,,,,,,,

1"#1 The use of unreasonable means to collect debts is a matter of %eneral concern to the public# This concern is especially apparent durin% the current time of economic downturn when the number of individuals havin% difficulty meetin% their financial obli%ations is on the increase# 9lthou%h recent statistics1! indicate that improper collection tactics amountin% to criminal conduct have reduced in recent times due to the efforts of the 5olice> the same statistics show that harassment type collection tactics have become more prevalent# 1e are of the view that debtors> their family members and nei%hbours> as well as other innocent third(parties> should be afforded better protection from abusive collection tactics# 1"#, In formulatin% our proposals for reform> we fully reco%nise that credit providers and their a%ents are entitled to ta?e reasonable steps to ensure that debtors meet their obli%ations# This is a necessary incident of the debtor(creditor relationship without which prudent credit providers would be discoura%ed from providin% credit# 9ccordin%ly> our proposals see? to stri?e an appropriate balance between the le%itimate needs of creditors to collect debts with the ri%hts of debtors not to be sub/ected to unreasonable pressure and of third parties not to be unduly disturbed# 1"#0 In formulatin% our proposals for reform> we have ta?en into consideration the various factors which have contributed to unreasonable methods of debt collection>1 the level of protection afforded by criminal sanctions>," civil remedies>,1 includin% the developments in vicarious liability and other types of controls>,, the deficiencies of existin% controls>,0 as well as measures ta?en in other /urisdictions#,) 1e have also %iven due re%ard to the views %athered from the consultation exercise#

T#! *r%/%&al o''!&*! o' u&la9'ul #ara++/!&t o' (!)tor+ a&( ot#!r+
1"#) In the Consultation 5aper> the 'ub(committee proposed the enactment of a criminal offence of unlawful harassment of debtors modelled
1! 1 ," ,1 ,, ,0 ,)

'ee Chapter 1# 'ee para%raphs ,#1) ; ,#,1# 'ee Chapter 0# 'ee Chapter )# 'ee Chapter *# 'ee Chapter 3# 'ee Chapters + ; #

11"

on section )" of the <& 9dministration of Justice 9ct 1 +"> ,* which was formulated with the specific aim of tac?lin% common malpractices of debt collection#

6esponses
1"#* The 'ub(committee received forty(seven written responses on this recommendation in the consultation exercise# 'ixteen of the responses were in favour of enactin% the proposed criminal offence of unlawful harassment of debtors# Aourteen responses were either neutral or su%%ested some amendments to the proposed offence# 'eventeen of the responses> mainly from credit providers and collection a%encies> were a%ainst it#

ener%l or spe$ifi$
1"#3 =ost of the opponents of the proposal ob/ected to it because of a lac? of a precise definition of harassment# The main alternative to this would be to define harassment by reference to a list of permitted and prohibited conduct as has been done> for example> in le%islation enacted in 9lberta#,3 The main drawbac? of such detailed provisions is the obvious difficulty in listin% exhaustively every ?ind of unacceptable behaviour that is used to apply pressure on debtors to meet their financial obli%ations# Even if this could be done> the ability of debt collectors who en%a%e in unreasonable practices to come up with new methods in order to circumvent the offence cannot be discounted# In this re%ard> it is notable that the 5olice believe that statistics,+ showin% a decline in criminal debt collection activities and an increase in non(criminal abusive activities indicate a premeditated strate%y of debt collectors to operate in such a way as to ta?e advanta%e of the current inadeFuate le%al remedies# 1"#+ 9 more K%eneralJ criminal offence> althou%h it may seem va%ue> has the advanta%e of flexibility and of bein% able to evolve throu%h /udicial interpretation to meet the needs of the time# 'ome reference can also be made to /udicial decisions in other common law /urisdictions# Aor example> the 9ustralian Aederal Court has made useful comments on what constitutes Gundue harassmentH and GcoercionH in Australian Competition 9 Consumer Commission v McCas ey 9 Cash .eturn Mercantile PT: !td AC9 1"0+#,! 1"#! To illustrate the point that a detailed and specific offence may not wor? as satisfactorily as a K%eneralJ> offence> especially for an offence which involves KreasonablenessJ> one may consider the example of a debt collector callin% a debtorJs residential phone number late at ni%ht# This act may at first si%ht seem unreasonable> and under 9lbertaJs Collection 5ractices 9ct 1 !"> ma?in% a call after 1" p#m# for the purpose of demandin% payment
,* ,3 ,+ ,!

'ee para%raphs +#, ; +#!# 'ee para%raphs +#*1 ; +#*,# 'ee para%raphs 1#) ; 1#+# 'ee para%raphs +#01 ; +#0*#

111

of a debt is prohibited# $owever> if the debt collector has already exhausted other less intrusive means of communication> li?e issuin% reminder letters> warnin% letters> leavin% messa%es at his mobile phone number and residential number> and the debtor has not responded or has not provided other effective means of communication> then the act of callin% late at ni%ht may> in some limited circumstances> be considered reasonable# <nder a K%eneralJ offence a /ud%e will be able to ta?e all relevant factors into consideration> and a KfriendlyJ personal visit to remind the debtor of the debt at 11 a#m# may be considered a contravention of the proposed offence if> for example> the personal visit is conducted on the debtorJs weddin% day# 1"# The /ud%ment of the Aederal Court of 9ustralia in Australian Competition 9 Consumer Commission v McCas ey 9 Cash .eturn Mercantile 5TE Ltd AC9 1"0+, shows how a K%eneralJ offence wor?s in reality and provides some useful observations on the issue# The facts and other details of the case are set out in Chapter +#0" In short> the court observed that: @K a consumer $ho o$es money to a supplier can e=pect repeated un$elcome approaches requesting payment of the debt if he or she does not payA 1o doubt such approaches might also qualify as harassmentA 'f legitimate demands are reasonably made/ on more than one occasion/ for the purpose

, 0"

9s above# 'ee para%raphs +#01 ; +#0* above#

11,

of reminding the debtor of his or her obligation and dra$ing the debtor2s attention to the li elihood of legal proceedings if payment is not made/ then that conduct/ if it be harassment/ is not undue harassmentA 'f/ ho$ever/ the frequency/ nature or content of the approaches and communications associated $ith them is such that they are calculated to intimidate or demoralise/ tire out or e=haust a debtor rather than convey the demand and an associated legitimate threat of proceedings/ the harassment $ill be undueAB 1"#1" In order to %ive some %uidelines on behaviour which may be re%arded as KharassmentJ> we recommend that a code of practice should be devised to wor? in con/unction with a %eneral offence# -etails are set out in Recommendation 1"# 'uch %uidelines should> we believe> %o at least some way to meetin% concerns about the lac? of precision of the proposed K%eneralJ offence# $avin% considered the above> we consider it is advisable to adopt the criminal offence of unlawful harassment of debtors modelled on section )" of the <& 9dministration of Justice 9ct 1 +"> sub/ect to some modifications#

Mo+ifi$%tions
1"#11 1e propose various modifications to 'ection )"6176a7 of the <& 9ct# Airst> we su%%est that it be specified that> without affectin% the %enerality of sub(para%raph 6a7> it is harassment if any person in ma?in% demands for payment sends to another a letter or any article which: 6i7 is> in whole or in part> of an indecent or %rossly offensive natureD or 6ii7 conveys information which is false and ?nown or believed to be false by the sender# 1"#1, 'econd> in view of the concerns raised about harassment of referees and other third parties by debt collectors> we propose to extend the scope of application of sub(para%raph 6a7 to include alarm and distress suffered by third parties# This can be achieved by addin% Gor any other personH after Gfamily or householdH# 1"#10 Third> in li%ht of the /udicial interpretation of section )" in 1or$eb plc v Di=on>01 we propose to substitute the words Gpay money claimed from the other as a debt due under a contractH in section )"617 with Grepay a debtH> and to replace the word GcalculatedH with Gli?elyH in sub(para%raph 6a7# 1"#1) 1e consider that sub(para%raphs 6b7> 6c7 and 6d7 of section )"617> and section )"607 of the 1 +" 9ct can be adopted without substantial chan%es> except that modifications should be made to ensure harassment and representations conveyed by electronic means of communication would be covered by the proposed le%islation#

L%w 6eform (ommission 6eport on St%lking

01

N1

*O 0 9ll ER *,# 'ee discussion in para%raphs +#* ; +#+#

110

1"#1* 'ince the publication of the Consultation 5aper in July ,"""> the Law Reform Commission issued its Report on 'tal?in% in 8ctober ,"""# The 'tal?in% Report recommended> amon% other thin%s> a new offence whereby: G6a7 a person who pursues a course of conduct which amounts to harassment of another> and which he ?nows or ou%ht to ?now amounts to harassment of the other> should be %uilty of a criminal offenceD for the purposes of this offence> the harassment should be serious enou%h to cause that person alarm or distressD and a person ou%ht to ?now that his course of conduct amounts to harassment of another if a reasonable person in possession of the same information would thin? that the course of conduct amounted to harassment of the other#H

6b7 6c7

The defendant would have a defence if: G6a7 the conduct was pursued for the purpose of preventin% or detectin% crimeD

11)

6b7 6c7

the conduct was pursued under lawful authorityD or the pursuit of the course of conduct was reasonable in the particular circumstances#

1"#13 It is uncertain at the time of writin% whether the recommendations would result in any le%islation> and whether the recommendations would be sub/ect to modification# Even assumin% the recommendations will be enacted in their present form> the proposed stal?in% offence is desi%ned to deal with stal?in% activities 0, and would not operate satisfactorily if one relies on it to deal with debt collection cases# Ta?e the example %iven above00 of a personal visit on a debtorJs weddin% day to collect the debt# The Kstal?in%J offence reFuires Ka course of conductJ which usually connotes repetition#0) It is doubtful whether an isolated but vi%orous debt collection action would be covered by the proposed Kstal?in%J offence# $ence> it is necessary to formulate an offence to tar%et debt collection activities specifically#

0,

00 0)

5ara%raph 1#1 of the 'tal?in% Report reads: G'tal?in%> li?e shopliftin% and vandalism> is a description rather than a le%al concept# R Celia 1ells describes Gstal?in%H as Gthe pursuit by one person of what appears to be a campai%n of harassment or molestation of another> usually with an undertone of sexual attraction or infatuation# R Tim Lawson(Cruttenden defines stal?in% as Gbehaviour which sub/ects another to a course of persistent conduct> whether active or passive> which ta?en to%ether over a period of time amounts to harassment or pesterin%#H 5ara%raph 1"#!# The 'tal?in% Report mentioned at para%raph 3#,3 that GR whether conduct on two or more occasions amounts to harassment depends on the circumstances of the case# To achieve flexibility> the le%islation should neither specify the number of incidents involved nor specify the period of time within which the incidents should occur#H

11*

R!*o//!&(at%o& W! r!*o//!&( t#atG A *r%/%&al o''!&*! o' #ara++/!&t o' (!)tor+ a&( ot#!r+ +#oul( )! *r!at!(> +u*# t#at %t 9oul( )! a& o''!&*! %' a "!r+o&> 9%t# t#! o)2!*t o' *o!r*%&$ a&ot#!r "!r+o& to r!"ay a (!)t < AaB #ara++!+ t#! ot#!r 9%t# (!/a&(+ 'or "ay/!&t 9#%*#> %& r!+"!*t o' t#!%r 'r!Hu!&*y or t#! /a&&!r or o**a+%o& o' /a %&$ a&y +u*# (!/a&(> or o' a&y t#r!at or "u)l%*%ty )y 9#%*# a&y (!/a&( %+ a**o/"a&%!(> ar! l% !ly to +u)2!*t #%/ or /!/)!r+ o' #%+ 'a/%ly or #ou+!#ol( or a&y ot#!r "!r+o& to alar/> (%+tr!++ or #u/%l%at%o&I 'al+!ly r!"r!+!&t+> %& r!lat%o& to t#! /o&!y *la%/!(> t#at *r%/%&al "ro*!!(%&$+ l%! 'or 'a%lur! to "ay %tI 'al+!ly r!"r!+!&t+ #%/+!l' to )! aut#or%+!( %& +o/! o''%*%al *a"a*%ty to *la%/ or !&'or*! "ay/!&tI or utt!r+ a (o*u/!&t 'al+!ly r!"r!+!&t!( )y #%/ to #a4! +o/! o''%*%al *#ara*t!r or "ur"ort%&$ to #a4! +o/! o''%*%al *#ara*t!r 9#%*# #! &o9+ %t #a+ &ot.

A)B A*B A(B

W%t#out a''!*t%&$ t#! $!&!ral%ty o' "ara$ra"# AaB> "ro4%+%o& +#oul( )! /a(! t#at %' a&y "!r+o& %& /a %&$ (!/a&(+ 'or

113

"ay/!&t +!&(+ to a&ot#!r a l!tt!r or a&y art%*l! 9#%*# G A%B %+> %& 9#ol! or %& "art> o' a& %&(!*!&t or $ro++ly o''!&+%4! &atur!I or A%%B *o&4!y+ %&'or/at%o& 9#%*# %+ 'al+! a&( &o9& or )!l%!4!( to )! 'al+! )y t#! +!&(!r> t#%+ 9oul( al+o *o&+t%tut! #ara++/!&t. Pro4%+%o& +#oul( al+o )! /a(! 'or "ara$ra"# AaB to #a4! &o a""l%*at%o& %& r!+"!*t o' a&yt#%&$ (o&! 9#%*# %+ r!a+o&a)l! 'or t#! "ur"o+! o' !%t#!r +!*ur%&$ t#! (%+*#ar$! o' a& o)l%$at%o& (u!> or )!l%!4!( to )! (u!> or 'or t#! !&'or*!/!&t o' a&y l%a)%l%ty )y l!$al "ro*!++. Furt#!r> t#at a "!r+o& /ay )! $u%lty o' a& o''!&*! )y 4%rtu! o' "ara$ra"# AaB a)o4! %' #! *o&*!rt+ 9%t# ot#!r+ %& t#! ta %&$ o' +u*# a*t%o& a+ %+ (!+*r%)!( %& t#at "ara$ra"#> &ot9%t#+ta&(%&$ t#at #%+ o9& *our+! o' *o&(u*t (o!+ &ot )y %t+!l' a/ou&t to #ara++/!&t. E0"r!++ "ro4%+%o& +#oul( )! /a(! to !&+ur! t#at #ara++/!&t a&( r!"r!+!&tat%o&+ *o&4!y!( )y !l!*tro&%* /!a&+ o' *o//u&%*at%o& ar! *o4!r!( )y t#! "ro"o+!( o''!&*!.

Other fe%tures of the offen$e

1"#1+ 8ther aspects of the proposed offence> such as the appropriate

11+

level of the penalty for its commission> are matters that we leave to the responsible policy bureau to decide in consultation with relevant %overnment departments and bodies# 1"#1! .evertheless> we have the followin% observations on the more obvious matters for consideration:

=aximum term of imprisonment and fine ; The maximum term of imprisonment and amount of fine of the proposed offence could lie between those currently provided for in relation to criminal intimidation in section ,) Crimes 8rdinance 6Cap ,""7> a fine of M,>""" and imprisonment for , years if convicted summarily and * years imprisonment if convicted on indictment and the offences in connection with telephone calls or messa%es or tele%rams in section ," 'ummary 8ffences 8rdinance 6Cap ,,!7> a fine of M1>""" and , months in prison# 1ith re%ard to the level of fine> the su%%ested level of fine seems rather low for a crime that is motivated by economic %ain# The responsible bureau may consider ad/ustin% the level of the fine in order to achieve appropriate deterrent effect# 9ccessory to offences committed outside $on% &on% ; In view of the increase in trade and other activities between $on% &on%> the =ainland and =acau> and also the number of cross(border abusive debt collection complaints> it would appear to be advisable to include accessories to offences committed outside $on% &on% within the ambit of the proposed offence# 9n example of this can be found in section ,, Trade -escriptions 8rdinance 6Cap 03,7#0* Criminal liability on directors and mana%ers ; In the event that a debt collection a%ency is convicted of the offence> there may be cases in which it would be appropriate to sub/ect the directors and mana%ers to criminal liability# Reference may be made to section ," Trade -escriptions 8rdinance 6Cap 03,7 03 and section 039 Import and Export 8rdinance 6Cap 3"7#

(rimin%l s%n$tions for p%rti$ip%tion

1"#1 9 number of the responses received in the consultation exercise proposed the inclusion of detailed provisions on KparticipationJ in the proposed
0*

03

'ection ,, reads: G'ub/ect to the provisions of this 8rdinance> any person who> in $on% &on%> procures> counsels> aids> abets or is accessory to the commission outside $on% &on% of an act which> if committed in $on% &on%> would be an offence under this 8rdinance> commits that offence as a principal and shall be liable to be prosecuted in $on% &on% as if the offence had been committed within $on% &on%#H 'ection ," reads: G1here a body corporate is convicted of an offence under this 8rdinance> every person who> at the time of the commission of the offence> was a director> mana%er> secretary or other similar officer of the body corporate> or any person who was purportin% to act in any such capacity> shall be deemed to be %uilty of that offence unless he proves that the offence was committed without his ?nowled%e> or that he exercised all due dili%ence to prevent the commission of the offence#H

11!

offence> in particular in relation to the liability of secondary parties> or to specify that creditors will not be held liable under the proposed offence# 1"#," 1e do not consider that the proposals put forward are supported by sufficiently stron% ar%uments to /ustify the enactment of special provisions on KparticipationJ in relation to the proposed offence# 9ccordin%ly> we are of the view that the %eneral law on criminal participation should apply to the proposed offence without modification#

L%*!&+%&$
1"#,1 In the Consultation 5aper> the main ar%uments a%ainst the introduction of a licensin% system for debt collectors were summarised as follows: 6a7 9 licensin% re%ime cannot curb ille%al activities arisin% from debt collection> because delinFuent operators would not offer themselves for licensin%> either ?nowin% that they would not be %ranted a licence> or believin% that it would more advanta%eous for them to operate outside the licensin% re%ime# $ence> licensin% should not be seen as a tool capable of combatin% directly the criminal activities associated with debt collection# 9 licensin% re%ime would only be effective to re%ulate prudent and ethical mar?et operators who are prepared to abide by the rules# 'uch prudent and ethical operators would not en%a%e in ille%al activities whether or not a licensin% re%ime is in place# 9lthou%h it is envisa%ed that under the licensin% scheme> those who operate without a licence will be identified and prosecuted>

6b7

6c7

11

licensin% cannot put an end to ille%al debt collection practices which are already sanctioned under existin% laws# The problem lies in the difficulty of detectin% the perpetrators# 9s these perpetrators are li?ely to continue to wor? for unlicensed a%encies> it is unli?ely that licensin% would facilitate detection# 6d7 9 licensin% re%ime would have si%nificant resource implications on public revenue and create unnecessary bureaucracy# Even thou%h a licence fee may be char%ed to recover full administration costs of the licensin% authority> other costs are not recoverable# These include costs of law enforcement and providin% an appeal mechanism> which will have to be supported by public funds# Reputable mar?et operators would have to bear extra costs in the form of licensin% fees> which may be passed on to client financial institutions or to consumers ultimately# Civen the relatively small number of a%encies involved in debt collection> the licence fee may be substantial# Licensin% leads to further problems as it will be necessary to devise an appropriate re%ulatory system which would be cost( effective# The ar%uments in favour of licensin% were summarised as Covernments sometimes have to intervene in mar?ets to achieve certain social %oals that are not achieved by ordinary mar?et mechanisms# In the context of debt collection> occupational licensin% which imposes security chec?s on entrants should reduce the ris? of harm to the public by

6e7

6f7

1"#,, follows: 6a7

1,"

excludin% practitioners li?ely to en%a%e in harmful activities# 6b7 If it is an offence to operate as a debt collector without a licence> then unless an identified delinFuent operator refrains from demandin% repayment of debts> the 5olice have the power to ta?e action a%ainst him as soon as he demands repayment# 9 delinFuent operator who chooses not to apply for a licence can be convicted for operatin% without a licence# =any prudent and ethical operators are in favour of licensin% because in the absence of a licensin% system> they have to face unfair competition from operators who en%a%e in abusive or harassment type activities# 9 licensin% system will %ive stron% incentives to debt collectors to abide by the rules so that their licences will not be revo?ed and will be renewed on expiry# 1hilst it may be that licensin% would not materially affect the collection manner of operators at the top(end of the industry> the middle ran%e of operators can be re%ulated and improved by licensin%# The bottom end> if they remained at that end> should not be allowed to operate as debt collectors# In other words> licensin% would reduce malpractices even if it could not curb ille%al activities# Even assumin% that a licensin% re%ime is not strictly necessary> it would be a useful corollary to any proposed statutory offence# If breach of the statutory offence may result in revocation of the licence> debt collection a%encies and debt collectors are li?ely to be more cautious before underta?in% over(a%%ressive action# 9 licensin% system would provide the authorities with valuable and comprehensive information about the debt collection

6c7

6d7

6e7

6f7

6%7

1,1

industry# 'uch information would be useful in the formulation of policies> as well as in the fi%ht a%ainst crime# 6h7 5ersons of Fuestionable inte%rity or with previous convictions would be disallowed from en%a%in% in such activities> and thereby safe%uardin% the interests of debtors and third parties# Infiltration by triad %roups and loanshar?s in the debt collection industry could be curbed> which would indirectly debilitate triad %roups and ma?e it more difficult for them to profit from loanshar?in% business# The formulation of licensin% reFuirements could raise the standards of entrants to the industry> and thereby encoura%e professionalism# It could also help the ima%e of le%itimate licensed debt collectors# =easures could be ta?en to minimi:e the administrative costs of a licensin% re%ime> includin% renewin% licences bi(annually

6i7

6/7

6?7

1,,

instead of annually# In addition> the 9dministration may consider full(cost recovery financin%> in which case more of the administrative costs will be borne by the mar?et operators instead of the %eneral public#

6esponses
1"#,0 The 'ub(committee received )1 written responses on the issue of licensin% debt collectors# 8f these> an overwhelmin% ma/ority> 0+ respondents> was in favour of the creation of a licensin% re%ime# Even amon% credit providers and debt collection companies> parties who would have to bear most of the costs in a self(financin% licensin% re%ime> support for a statutory licensin% system was overwhelmin%#

1,0

I0 Offi$e of 1%ir Tr%+ingFs review of the li$ensing s&stem

1"#,) In 1 !!> the <& Covernment proposed that the licensin% of Kancillary credit businessesJ>0+ includin% debt collection businesses> should be removed from the licensin% system provided for in the <& Consumer Credit 9ct 1 +)# It was proposed that instead of such businesses havin% to be licensed as a condition of bein% able to trade 6positive licensin%7> they should become sub/ect to a ne%ative licensin% system under which they would be allowed to trade freely> without havin% to apply for a licence> unless and until somethin% was found a%ainst them sufficient to /ustify> after due process> their no lon%er bein% allowed to trade# The proposal was not implemented# 1"#,* In 1 0> the <& 8ffice of Aair Tradin% issued a Consultation -ocument on the 1or?in% and Enforcement of the Consumer Credit 9ct 1 +)# The review0! was completed in June 1 )> and the conclusions reached by the -irector(Ceneral of Aair Tradin% included the followin%: @-AJ -AL !icensing does impose some burden on businessA K This fairly small burden must be set against the benefitsA A number of unfit traders are refused licences and 4 possibly more importantly 4 some $ith unsuitable bac grounds $ill not even bother to applyA K (or established traders/ the mere threat that their continued fitness to hold a licence could be in question may cause them to cease practices possibly detrimental to consumers and $hich may have arisen from incompetence or slac management rather than dishonesty/ as soon as the issues are addressed $ith them by my &ffice or by a local trading standards officerA Moreover/ the system enables me/ $ith the important support of trading standards officers/ to promote acceptable standards of behaviour/ since ' have a $ide discretion under the Act as to $hat constitutes fitnessA &verall my clear impression is that responsible business people in the credit and hire industries regard the costs of the licensing system as being more than balanced by the benefits of having standards maintainedA The confidence of customers in their type of business/ $hich can readily be undermined by a fe$ unscrupulous or oppressive traders/ is a positive business asset and ' %udge that they are prepared to accept the minor burdens on them $hich are necessary to achieve this ob%ectiveA This message emerged clearly from the consultationA There are no calls from $ithin the credit industry for an end to/ or a

-A6

0+ 0!

8ther ancillary credit business includes credit bro?era%e> debt(ad/ustin%> debt( counsellin%> and credit reference business# -ocument named KConsumer Credit -ere%ulation ; 9 review by the -irector Ceneral of Aair Tradin% of the scope and operation of the Consumer Credit 9ct 1 +) : June 1 )J#

1,)

diminution of licensingA 'ndeed/ several credit industry respondents said that they $ould have no concern about a $ider e=tension of licensing to cover those entering into business agreements/ $hether regulated or notD their concern lay $ith the impact upon their business of the detailed rules under the ActA -A55 K Credit bro ing and debt collecting/ in particular/ are activities $hich may require little or no capital investment and no fi=ed premises/ and for $hich no test of competence is requiredA They are thus activities into $hich people can move $ith ease using aliases and different legal identities/ and from $hich they could move on before a negative licensing system/ $hich could only be operated in retrospect/ could catch up $ith themA A negative system is therefore li ely to be less effective overall than a positive one in assuring high standards of

1,*

fitnessA -A5G 't is also $orth approaching the matter by considering the particular categories of activity $hich it $as proposed in 5-++ should move to negative licensingA 'n actual fact they are the main problem sectorsA A relatively small proportion of my &fficeSs regulatory activity under the Act is directed at activities in categories A and 3 )lending and hiring,D most is aimed at C and # )credit bro erage and debt collection,A Ta ing debt collection first/ it is an activity $hich e=perience sho$s can be carried on by unacceptable methods particularly against those for $hom indebtedness has become/ unfortunately/ a regular state of affairsA (urthermore consumers have no choiceH they cannot choose their collectors/ nor go to different onesA A

-A5J

1,3

number of unsavoury cases of strong"arm tactics in this area come to my &fficeSs attention and these are reported in the media too from time to timeA The nature of this element of ancillary credit business therefore strongly suggests that it should remain sub%ect to a positive licensing systemAB

(on$lusion on Li$ensing
1"#,3 In view of the overwhelmin% ma/ority of responses in favour of licensin%> and havin% re%ard to the conclusion of the <& 8ffice of Aair Tradin% that debt collection is an activity for which positive licensin% is particularly appropriate> we propose that a statutory system of licensin% for debt collection should be introduced# In ma?in% this proposal> we reco%nise nevertheless that licensin% is not a universal panacea and other measures> as proposed in this report are reFuired to tac?le the full ran%e of problems associated with

1,+

debt collection# In order to ma?e the licensin% system effective> it is necessary to ma?e it a criminal offence to collect debts as a business or profession without a licence#

R!*o//!&(at%o& 2 W! r!*o//!&( t#atG D!)t *oll!*t%o& a$!&*%!+ +#oul( )! +u)2!*t to a +tatutory l%*!&+%&$ +y+t!/ u&(!r 9#%*# %t +#oul( )! a *r%/%&al o''!&*! to *oll!*t (!)t+ a+ a )u+%&!++ 9%t#out a 4al%( l%*!&*!.

7hether % person who knowingl& eng%ges %n unli$ense+

1,!

$olle$tion %gen$& e@u%ll& $ommits %n offen$e

1"#,+ 'ome of the responses received in the consultation exercise su%%ested that a person who ?nowin%ly en%a%es an unlicensed debt collector should be %uilty of an offence# 1e believe it is not necessary to ma?e any such express provision for this because it is already catered for by the %eneral law on secondary participation#0

(ivil li%?ilit& of % $re+itor in respe$t of the %$ts of the +e?t $olle$tor

1"#,! The law on vicarious liability for torts committed by an a%ent is still developin% as is illustrated by 8ong 8ai Hing and (ung Siu !ing v Hui 8ei !ee#)" There are also su%%estions in 8ong 8ai Hing case that> dependin% on the facts of the case> a creditor may be liable in ne%li%ence to an a%%rieved debtor if the creditor has not exercised reasonable care in its choice of debt collector# 1e believe the issue of vicarious liability for torts committed by an a%ent is an area of %eneral law which is applicable also to activities other than debt collection> and would be more appropriately dealt with by the courts#

Co//!r*%al 4+ *o&+u/!r (!)t+

1"#, It was recommended in the Consultation 5aper that the proposed licensin% re%ime should cover both commercial and consumer debts for the followin% reasons: @'t has been suggested that commercial debts should not be covered by the proposed licensing regime because commercial debtors are capable of protecting their o$n interestsA The Sub" committee is of the vie$ that no distinction should be made bet$een consumer and commercial debtsA 8hilst some $ell" established commercial entities can handle debts effectively/ many corporate entities are vulnerable small"scale operatorsA The fact that personal guarantees are often provided as security to commercial loans further blurred the distinction bet$een the t$o types of loanA Abusive collection of commercial debts may $ell cause disturbance or an=iety of innocent third partiesAB

6esponses

)"

'ection ! of the Criminal 5rocedure 8rdinance 6Cap ,,17 provides that any person who Kaids> abets> counsels or procures the commission by another person of any offence shall be %uilty of the li?e offenceJ# N,""1O 1 $&LR- +03# 'ee para%raphs )#03 ; )#)1#

1,

1"#0" 8nly ! responses were received in relation to Recommendation 0> with * responses in favour and 0 responses a%ainst# The reasons put forward by those a%ainst the Recommendation can be summarised as follows:

There is no Fuestion of uneFual bar%ainin% positions in a commercial debt situation# If> however> collection of commercial debts is also to be re%ulated> only the small scale companies should be re%ulated# $ence> a distinction should be drawn accordin% to debt si:e> assets> or issued share capital of the company# Licensin% commercial debt collection is not a common practice in most developed countries# -ebt collectors involved in the collection of commercial debts are %enerally of hi%her personal Fuality and education level# The activity reFuires a specialist ?nowled%e of the commercial sector to complete each assi%nment# The ris? of such debt collectors resortin% to abusive tactics is low# 'uch tactics would only /eopardi:e the recovery potential of a commercial claim# Commercial debts are by nature different from consumer debts# The payment liability of a debt lies on the entity instead of the individual# Collectors of commercial debts tend to play the role of mediators rather than simply debt collectors# 5ersonal %uarantees on commercial debts other than those to ban?s are rare# In addition> ban?s seldom reFuire assistance in collectin% commercial debt on their behalf#

1"#01 1e are not convinced by these ar%uments and do not accept the bare assertion that personal %uarantees are rare other than in respect of ban? loans# Aor the reasons %iven in para%raph 1"#, and to avoid the anomaly that the use of unreasonable measures to collect commercial debts fallin% short of a civil wron% or criminal offence would result in no sanction a%ainst the debt collector concerned> we recommend that the proposed statutory licensin% re%ime for debt collector include the collection of commercial debts#

R!*o//!&(at%o& 3 W! r!*o//!&( t#atG T#! "ro"o+!( l%*!&+%&$ r!$%/! +#oul( *o&+u/!r (!)t+ a&( *o//!r*%al (!)t+. *o4!r )ot#

10"

L%*!&+%&$ aut#or%ty
1"#0, In the Consultation 5aper> the view was expressed that the 9dministration was best placed to decide on the appropriate body to underta?e the role of licensin% authority under the proposed statutory licensin% re%ime# $owever> the followin% observations were made on this topic:

The licensin% authority for debt collectors in other /urisdictions is often an administrative body# In the <nited &in%dom> it is the -irector Ceneral of Aair Tradin%D )1 in 9lberta> the 9dministrator of Collection 5racticesD), in Pueensland> the 9uctioneers and 9%ents CommitteeD)0 in 'outh 9ustralia> the 8ffice of Consumer and Business 9ffairsD)) and in 'outh 9frica> the Council for -ebt Collectors#)* 9dministrative bodies have also been created for the security and %uardin% services industry and the estate a%ency business in $on% &on%# 9s re%ards the money lendin% business> the arran%ement involves three relevant authorities in the administration of the =oney Lenders 8rdinance> namely> the Re%istrar of Companies> the Commissioner of 5olice and the licensin% court# It is also feasible to dispense with an administrative body as in .ew 'outh 1ales# 9pplications are lod%ed with the Local Court which then refers the applications to the police for comment# )3 9nother possibility is to vest the police with powers as the licensin% authority directly> %iven that the investi%ation and vettin% wor? is carried out by the police# This approach was once contemplated in .ew 'outh 1ales#)+

The 9dministration should consider the pros and cons of creatin% an administrative body to oversee the licensin% wor?> as well as the possibility of streamlinin% the licensin% re%ime as far as practicable# Consideration should also be %iven to whether the mer%in% of licensin% of debt collectors into any existin% licensin% re%ime would achieve savin%s in resources#

6esponses
1"#00
)1 ), )0 )) )* )3 )+

9 total of 1! responses were received on this issue# =ost of the

'ee para%raph !#3# 'ee para%raph !#0)# 'ee para%raph !#00# 9s above# 'ee para%raph !#)*# 'ee para%raph !#1+# 'ee para%raph !#,)#

101

responses expressed concerns about the need for the licensin% re%ime to be cost(effective# 8ther responses mentioned that there should be consultation with the collection industry before a decision is made on the issue# 1"#0) 1e a%ree with the responses and> in line with the relevant recommendation in the Consultation 5aper recommend that the 9dministration have due re%ard to the experience of other /urisdictions in determinin% the appropriate body to carry out the licensin% of debt collectors and in devisin% an efficient and cost(effective licensin% re%ime#

R!*o//!&(at%o& 5 W! r!*o//!&( t#atG T#! A(/%&%+trat%o& +#oul( #a4! (u! r!$ar( to t#!

10,

!0"!r%!&*! o' ot#!r 2ur%+(%*t%o&+ %& (!t!r/%&%&$ t#! a""ro"r%at! )o(y to *arry out t#! l%*!&+%&$ o' (!)t *oll!*tor+ a&( %& (!4%+%&$ a& !''%*%!&t a&( *o+t1!''!*t%4! l%*!&+%&$ r!$%/!.

100

Coll!*t%o& a$!&*%!+ a&( *oll!*tor+

1"#0* The Consultation 5aper recommended that the reFuirement for licensin% under the proposed licensin% re%ime should include debt collection a%encies and individual debt collectors# The recommendation was based on the followin%:

In the <nited &in%dom> only one licence is reFuired for each debt collectin% businessD there is no need for the employee debt collectors to be licensed# In .ew 'outh 1ales and 4ictoria>

10)

however> the business owner as well as the employees are reFuired to obtain commercial a%ent licence and suba%ent licence respectively# The same is also true for 9lberta and 'outh 9frica in that both the collection a%ency and its individual collectors must be licensed#

In $on% &on%> the 'ecurity and Cuardin% 'ervices 8rdinance reFuires the business owner to obtain a security company licence and the employees to obtain security personnel permit# The Estate 9%ents 8rdinance also reFuires both company licences and

10*

individual licences# 8n the other hand> both the =oney Lenders 8rdinance and the Travel 9%ents 8rdinance reFuire only the business owner to be licensed#

Individual debt collectors should be reFuired to obtain a licence since a ma/or reason for licensin% is to exclude persons of Fuestionable inte%rity from enterin% the business#

6esponses

103

1"#03 9mon% the 1* responses received> 1, were in favour of licensin% individual collectors# The other 0 responses were a%ainst the idea for the followin% two main reasons:

It is more cost(effective to license only the a%encies# Individuals of Fuestionable inte%rity are already sub/ect to the criminal law in respect of any ille%al activities that they may perform#

10+

.one of the responses su%%ested licensin% individual debt collectors and not licensin% debt collection a%encies# 1"#0+ 1e are of the view that the licensin% of individual debt collectors is the most effective way of ensurin% that such persons pursue their occupation responsibly and professionally# This view accords with the overwhelmin% ma/ority of responses on this issue> which were supportive of the recommendation#

10!

1"#0! 8ne of the responses su%%ested that clarification be %iven that support staff of collection a%encies should not reFuired to be licensed# 1e a%ree that support staff who are not involved in communicatin% with any debtors> referees or their family and friends> should not reFuire licensin%# Communication in this context should include written> verbal> electronic and personal visits forms of communication#

R!*o//!&(at%o& 6 W! r!*o//!&( t#atG T#! l%*!&+%&$ r!Hu%r!/!&t o' t#! "ro"o+!( +tatutory l%*!&+%&$ r!$%/! +#oul( %&*lu(! %&(%4%(ual (!)t *oll!*tor+ a+ 9!ll a+ (!)t *oll!*t%o& a$!&*%!+> )ut +u""ort +ta'' o' *oll!*t%o& a$!&*%!+ 9#o ar! &ot %&4ol4!( %& *o//u&%*at%&$ 9%t# a&y (!)tor+> r!'!r!!+ or t#!%r 'a/%l%!+ a&( 'r%!&(+> 9oul( &ot r!Hu%r! l%*!&+%&$. Co//u&%*at%o& %& t#%+ *o&t!0t %&*lu(!+ 9r%tt!&> 4!r)al> !l!*tro&%* a&( "!r+o&al 4%+%t+ 'or/+ o' *o//u&%*at%o&.

E0!/"t%o&+ 'ro/ l%*!&+%&$

1"#0 It was recommended in the Consultation 5aper that the followin% cate%ories of creditors or persons should be exempted from obtainin% a licence under the proposed statutory licensin% scheme for debt collectors ( 6i7 6ii7 a creditor collectin% his own debt> provided he did not become a creditor by an assi%nment of the debtD a creditor who became a creditor by virtue of an assi%nment of debt> provided the assi%nment was made in connection with a transfer of business> other than a debt collectin% businessD barristers actin% in that capacityD solicitors actin% in that capacity and their employeesD court bailiffsD and authori:ed institutions#

6iii7 6iv7 6v7 6vi7

6esponses
1"#)" 9 total of 1! responses were received on this recommendation# =ost of the responses su%%ested additional cate%ories of persons for 10

exemption from licensin%# 1"#)1 include:

1e a%ree that exemption from licensin% should be extended to Le%al officers> as defined in section , of the Le%al 8fficers 8rdinance 6Cap !+7> and Receivers> liFuidators and trustees in ban?ruptcy#

1e are not aware of any incidents su%%estin% that unreasonable collection tactics have been employed by these persons# $ence> there is no need to over(burden the licensin% re%ime with the re%ulation of these persons# Should credit insurers be e=empted> 1"#), 8ne of the responses su%%ested that Kcredit insurersJ should be exempted from licensin% because they should be re%arded as Kcreditors collectin% their own debtsJ# The position in relation to a credit insurer is that it has a ri%ht of subro%ation after ma?in% a payment %iven that the doctrine of subro%ation applies to Kcontin%ency insurance coverin% non(payment of moneyJ)! 6i#e# credit insurance7# 9 ri%ht of subro%ation is Ga ri%ht to be placed in the position of the assured so as to be entitled to the advanta%e of all the ri%hts and remedies which the assured possesses a%ainst third parties in respect of the sub/ect matter#H ) .evertheless> a credit insurer is still reFuired to brin% any action for recovery of the debt concerned in the name of the assured> and cannot do so in the absence of a formal assi%nment of the ri%ht of action#*" 1e do not believe that the case of credit insurers /ustifies any dero%ation from the %eneral principle that a party who see?s to collect a debt by way of assi%nment should not be re%arded as collectin% its own debt and hence escape the licensin% re%ime 6para%raph 1"#0 6i7 above refers7# 1e also note that credit insurers are more li?ely than not to en%a%e third parties to collect their debts who would need to be licensed in any event# Should companies $ithin the same group be e=empted> 1"#)0 'ome of the responses su%%ested that Ka company collectin% debts for other companies within the same %roup of companiesJ should be exempted from licensin%# It appears that this proposal is based on the fact that some ban?s> or other creditors> have a practice of usin% a different corporate entity to chase debts# This may be done to convey a messa%e to debtors that their debts are in a serious sta%e of delinFuency# 9s the choice to use another corporate entity> albeit within the same %roup> is one ta?en by the creditor for its own benefit> we consider that the other entity should be reFuired to obtain a licence# In any event> we have reservations about the practicality of definin% what constitutes Ka company within the same %roup of

)! ) *"

$alsburyJs Laws of En%land> Butterworths -irect 8nline version> para *"*# .ote that subro%ation does not apply to some insurance> for example> life insurance# 9s above> at para *"3# 9s above> at para *" #

1)"

companiesJ# 9ccordin%ly> we conclude that the proposed exemption is neither /ustified nor practical and should not be included in the proposed licensin% re%ime# &ther e=empted categories suggested 1"#)) 8ther cate%ories of persons that were su%%ested in the responses for exemption from the licensin% reFuirement include factorin% houses and licensed money lenders# 1e consider that the su%%ested exemptions are not /ustified for the reasons %iven below:

Aactorin% houses ; These are chiefly finance companies that purchase another firmJs or companyJs account receivables> and then endeavour to process and collect the balances of these accounts# The factorin% house assumes the ris? of not bein% able to collect the balance in return for some a%reed discount# In many cases> their wor? cannot be clearly distin%uished from that of debt collection a%encies> which sometimes also purchase the debts by way of assi%nment# Licensed money lenders ; If a licensed money lender is collectin% its own debt> it is already covered by the exemption for such persons 6para%raph 1"#0 6i7 above refers7# If it is collectin% a debt on behalf of another> there is no %ood reason for it to be exempted#

1amed organisations 1"#)* Certain named or%anisations were su%%ested in the responses for exemption from licensin%:

The $& =ort%a%e Corporation Ltd *1 6Gthe $&=CH7: this purchases mort%a%e loans from authori:ed institutions> %overnmental entities and real estate developers and securiti:es mort%a%e loans on its retained portfolio# <pon the purchase by the $&=C of the mort%a%e loans from an authori:ed institution> the $&=C appoints the same authori:ed institution as servicin% a%ent to service the mort%a%es# In relation to the mort%a%e loans which the $&=C purchases from the %overnmental authorities and developers> the $&=C will normally appoint an authori:ed institution as its servicer in respect of such mort%a%e loans# =ost> if not all> the debt collectin% activities to date are carried out by authori:ed institutions as $&=CJs servicers# The types of debt collection activities underta?en by $&=C servicers include both /udicial and non(/udicial measures# 'hould the $&=C decide to service the mort%a%es itself in future> the $&=C will not fall within any of the exempted cate%ory#

*1

The $&=C was set up in =arch 1 + and is 1""I owned by the $on% &on% '9R Covernment throu%h the Exchan%e Aund# The shares of $&=C are 1""I held by the Ainancial 'ecretary who is the Chairman of the Corporation#

1)1

The $on% &on% Export Credit Insurance Corporation 6Gthe $&ECICH7: this is a statutory body established in 1 33 by the $on% &on% Export Credit Insurance Corporation 8rdinance 6Cap 111*7 to encoura%e and support export trade throu%h the provision of insurance protection for $on% &on% exporters a%ainst non(payment ris?s arisin% from commercial and political events# Its capital is wholly(owned by the Covernment which also %uarantees its contin%ent liability> currently standin% at M1" billion#

1"#)3 1e are of the view that the exemption of such bodies from licensin% is /ustified %iven their uniFue status and public interest characteristics# In order to provide for this and for the exemption of other bodies of a similar nature that are> or may come into existence> we recommend that the le%islation establishin% the proposed licensin% scheme include a list of named or%anisations considered to be worthy of specific exemption from licensin%# Aurther> in order to provide flexibility> the le%islation should ma?e provisions for amendments to the list to be made by> say> the Chief Executive in Council or 'ecretary for Ainancial 'ervices#

R!*o//!&(at%o& 7 W! r!*o//!&( t#atG T#! *at!$or%!+ o' *r!(%tor+ a&( "!r+o&+ l%+t!( )!lo9 )! !0!/"t!( 'ro/ t#! r!Hu%r!/!&t to o)ta%& a l%*!&*! u&(!r t#! "ro"o+!( l%*!&+%&$ +*#!/! 'or (!)t *oll!*tor+G A%B A%%B a *r!(%tor *oll!*t%&$ #%+ o9& (!)t> "ro4%(!( #! (%( &ot )!*o/! a *r!(%tor )y a& a++%$&/!&t o' t#! (!)tI a *r!(%tor 9#o )!*a/! a *r!(%tor )y 4%rtu! o' a& a++%$&/!&t o' (!)t> "ro4%(!( t#! a++%$&/!&t 9a+ /a(! %& *o&&!*t%o& 9%t# a tra&+'!r o' )u+%&!++> ot#!r t#a& a (!)t *oll!*t%&$ )u+%&!++I l!$al o''%*!r+> a+ (!'%&!( %& +!*t%o& 2 o' t#! L!$al O''%*!r+ Or(%&a&*! ACa" :8BI )arr%+t!r+ a*t%&$ %& t#at *a"a*%tyI +ol%*%tor+ a*t%&$ %& t#at *a"a*%tyI r!*!%4!r+> l%Hu%(ator+ a&( tru+t!!+ %& )a& ru"t*yI *ourt )a%l%''+I

A%%%B A%4B A4B A4%B A4%%B

A4%%%B aut#or%@!( %&+t%tut%o&+> a+ (!'%&!( %& t#! Ba& %&$

1),

Or(%&a&*! ACa" -66B. Pro4%+%o& )! /a(! 'or "art%*ular or$a&%+at%o&+ to )! !0!/"t!( 'ro/ t#! l%*!&+%&$ r!Hu%r!/!&t )y %&*lu+%o& %& a l%+t %& t#! l!$%+lat%o& t#at %+ +u)2!*t to a/!&(/!&t )y a +u%ta)l! )o(y or o''%*%al.

(olle$ting +e?ts %s % ?usiness or otherwise

1"#)+ 'ome responses su%%ested that persons or corporations underta?in% isolated or one(off collection wor? for another should not be sub/ect to the licensin% reFuirement of the proposed new le%islation# 1"#)! 1e a%ree that without such an exception the licensin% re%ime would be unnecessarily burdensome# To cater for this> we recommend that only persons or corporations carryin% on business as debt collectors in $on% &on% or advertisin%> announcin% or holdin% itself out as so conductin% itself> should reFuire to be licensed# There is ample authority upon the Fuestion of what constitutes the carryin% on of a business within a particular /urisdiction# 1e recommend> therefore> that the %eneral law should be relied upon to determine whether a debt collector is carryin% on business as such#

R!*o//!&(at%o& 8 W! r!*o//!&( t#atG O&ly a "!r+o& or *or"orat%o& *arry%&$ o& )u+%&!++ a+ a (!)t *oll!*tor %& Ho&$ Ko&$> or a(4!rt%+%&$> a&&ou&*%&$ or #ol(%&$ %t+!l' out a+ +o *o&(u*t%&$ %t+!l'> +#oul( r!Hu%r! to )! l%*!&+!( u&(!r t#! "ro"o+!( l%*!&+%&$ +*#!/!. T#! $!&!ral la9 /ay )! r!l%!( u"o& to (!t!r/%&! 9#at *o&+t%tut!+ *arry%&$ o& )u+%&!++ %& t#%+ *o&t!0t.

Cr%t!r%a 'or l%*!&+%&$

1"#) It was recommended in the Consultation 5aper that the criteria for determinin% whether a person is fit and proper to en%a%e in debt collection under the <& Consumer Credit 9ct 1 +) could be used as a basis for eFuivalent provision for $on% &on%# In addition> it was recommended that there should be residence status and a%e reFuirements> and that the licensin% authority should ta?e into consideration whether the applicant or its employees have committed any triad(related offences# 1"#*" <nder the criteria set out in the <& Consumer Credit 9ct 1 +)> 1)0

the applicant has to satisfy the licensin% authority that he is a fit person to en%a%e in debt collection activities> and that the name under which he applies to be licensed is not misleadin% or otherwise undesirable# The licensin% authority has to determine whether an applicant is a fit person to en%a%e in the activities havin% re%ard to all relevant circumstances> and in particular whether the applicant> his employees> a%ents or associates *, have ( 6a7 )b, committed any offence involving fraud or other dishonesty/ or violence/ contravened any provision made by or under the ;K Consumer Credit Act 5-6G/ or by or under any other enactment regulating the provision of credit to individuals or other transactions $ith individuals/ practised discrimination on grounds of se=/ colour/ race or ethnic or national origins in/ or in connection $ith/ the carrying on of any business/ or engaged in business practices appearing to the Director of (air Trading to be deceitful or oppressive/ or other$ise unfair or improper )$hether unla$ful or not,AJF

)c,

)d,

1"#*1 In relation to sub(para%raph 6a7 above> %iven that some poorly mana%ed debt collection a%encies in $on% &on% are suspected of employin% persons with> or claimin% to have> a triad bac?%round> it would be useful if the licensin% authority were empowered to ta?e into consideration whether the applicant or> where the applicant is a business> its employees has committed any triad(related offences#

6esponses
1"#*, 9 total of responses were received> the ma/ority a%reein% with the recommendations# 8ne of the responses> however> did not endorse a residency reFuirement#

*,

*0

The term GassociatesH is %iven a wide meanin%# 'ee section 1!) of the Consumer Credit 9ct 1 +)# Aor an individual> GassociatesH include spouse> former spouse> reputed spouse> relative> spouse of relative> business partner> spouse of business partner> and relative of business partner# GRelativeH means brother> sister> uncle> aunt> nephew> niece> lineal ancestor> and lineal descendant# Aor a body corporate> a body corporate is an associate of an individual if that individual is a controller of the body corporate> or if that individual and his associates to%ether are controllers of the body corporate# 9 body corporate is an associate of another body corporate ( 6a7 if the same person is a controller of both> or a person is a controller of one and persons who are his associates> or he and persons who are his associates> are the controllers of the otherD or 6b7 if a %roup of two or more persons is a controller of each company> and the %roups either consist of the same persons or could be re%arded as consistin% of the same persons by treatin% 6in one or more cases7 a member of either %roup as replaced by a person of whom he is an associate# 'ection ,*6,7# <nder the <& 9ct> if the -irector of Aair Tradin% is minded to refuse the application> he is obli%ed to %ive reasons for his decisions and to consider the written or oral representations of the applicant> who can further ma?e use of the appeal mechanisms> if reFuired> within the prescribed period# 'ee sections 00(0)> and )1#

1))

.esidence status requirement 1"#*0 were:

The %rounds %iven a%ainst a residence status reFuirement Certain institutions may employ overseas a%ents to pursue debtsD for example> debts owed by debtors previously resident in $on% &on% who have left to live overseas# The collection industry is becomin% more international as financial institutions extend their product offerin%s %lobally# This %ives rise not only to GmobileH debtors> but also to issues of both lan%ua%e and currency in relation to the extension of credit and to its repayment and collection# $ence> debt collection a%encies may be reFuired to employ non(residents with particular lan%ua%e s?ills> or who are resident in remote locations#

1"#*) 1e are in favour of retainin% a $on% &on% residential reFuirement because it would assist the enforcement of the licensin% authorityJs powers> and would afford better protection to debtors and the public# 9ddin% a residence reFuirement to the licensin% criteria would enable the relevant authority to invo?e its powers a%ainst the collection a%ency for breach of licensin% condition# Civen the circumstances in $on% &on% that collection a%encies could easily en%a%e non(residents from 'hen:hen or =acau to underta?e debt collection activities> the residence reFuirement should be recommended# &ther requirements 1"#** 1e note that the 'ecurity and Cuardin% 'ervices 8rdinance reFuires a licence holder to be able to provide suitable trainin% for its security staff> and to formulate appropriate supervisory methods# 9 similar reFuirement would be appropriate for a licensed debt collection a%ency# 1"#*3 Aor individual debt collectors> the 9ustralian /urisdictions %enerally have licensin% reFuirements relatin% to a%e> residence and educational attainments or experience# 1e consider that it would be appropriate to impose an a%e reFuirement that individual debt collectors should be at least 1! years of a%e# $owever> we do not consider that educational and experience reFuirements are appropriate to $on% &on%Js current circumstances# 8f course> as the debt collection industry develops there may come a time when such reFuirements become feasible in which the case the licensin% authority could propose that they be incorporated into the licensin% criteria# Appeal mechanism 1"#*+ 1e are of the view that appeal mechanisms should be in place so that applicants who are refused licences by the licensin% authority can have their applications re(considered# 8ne approach would be to provide that

1)*

any applicant a%%rieved by the decision of the licensin% authority in respect of the refusal> suspension or revocation of a licence> or the imposition of conditions on a licence may appeal to the 9dministrative 9ppeals Board *) within a prescribed period# 9 conseFuential amendment to the 'chedule to the 8rdinance will extend the application of the 9dministrative 9ppeals Board to the proposed le%islation# The 'chedule may be amended by order of the Chief Executive in Council> and the order shall be published in the Ca:ette# ** 9lternatively> the proposed le%islation may provide for a stand(alone appeal body# Aor example> applicants for licences under the Estate 9%ents 8rdinance 6Cap *117 have a ri%ht to appeal to the 'ecretary for $ousin%> who shall appoint a panel of persons to the hear the appeal# The Chairman of the panel will appoint a tribunal whose decision shall be final# *3

R!*o//!&(at%o& : W! r!*o//!&( t#atG A& a""l%*a&t 'or t#! $ra&t%&$ or r!&!9al o' a (!)t *oll!*t%o& l%*!&*! +#oul( )! r!Hu%r!( to +at%+'y t#! l%*!&+%&$ aut#or%ty t#at %t> %& t#! *a+! o' a *or"orat! a""l%*a&t> or #!> %& t#! *a+! o' a& %&(%4%(ual a""l%*a&t> %+ a '%t a&( "ro"!r "!r+o& to !&$a$! %& (!)t *oll!*t%o& a*t%4%t%!+> #a4%&$ r!$ar( to all r!l!4a&t *%r*u/+ta&*!+> a&( %& "art%*ular 9#!t#!r t#! a""l%*a&t> a&(> %& t#! *a+! o' a *or"orat! a""l%*a&t> #%+ !/"loy!!+> a$!&t+ or a++o*%at!+ #a4! < AaB A)B A*B A(B *o&tra4!&!( t#! o''!&*! o' u&la9'ul #ara++/!&t o' (!)tor+ a&( ot#!r+> or a&y o''!&*! %&4ol4%&$ 'rau( or (%+#o&!+ty> or 4%ol!&*!I *o//%tt!( a&y tr%a(1r!lat!( o''!&*!+I *arr%!( o& )u+%&!++ u&(!r a &a/! 9#%*# %+ /%+l!a(%&$ or ot#!r9%+! u&(!+%ra)l!I or *o//%tt!( a&y )r!a*# o' *o(! o' "ra*t%*!.

I& a((%t%o&> a& %&(%4%(ual (!)t *oll!*tor +#oul( )! r!Hu%r!( to )! at l!a+t -: y!ar+ o' a$!> a&( a r!+%(!&t o' Ho&$ Ko&$. A+ 'or a *or"orat! a""l%*a&t> %t +#oul( )! r!Hu%r!( to "ro4%(! +u%ta)l! tra%&%&$ to %t+ *oll!*t%o& +ta'' a&( to 'or/ulat! !''!*t%4! +u"!r4%+ory /!t#o(+. A& a""ro"r%at! a""!al /!*#a&%+/ a$a%&+t t#! (!*%+%o& o' t#! l%*!&+%&$ aut#or%ty +#oul( al+o )! (!4%+!(.

*) ** *3

'ee 9dministrative 9ppeals Board 8rdinance 6Cap )),7# 'ection ) of Cap )),# 'ections 01(0, Estate 9%ents 8rdinance# -isputes with re%ard to other matters> for example> the commission payable will be decided by the Estate 9%ents 9uthority with a mechanism for appeal to the -istrict Court# 'ection *" refers#

1)3

Statutory "o9!r+ a&( (ut%!+

1"#*! In the Consultation 5aper> certain statutory powers and duties commonly found in other /urisdictions were commended for consideration#

6esponses
1"#* 8nly five responses were received on this recommendation on statutory powers and duties# Aour of the responses were supportive of the recommendation# 8ne of the responses su%%ested that the licensin% authority should have the duty to exercise its powers of %rantin% or declinin% the application or renewal of a licence within a specified period# 1"#3" The statutory powers commonly %iven to the licensin% authority in other /urisdictions are:

to ma?e inFuiries re%ardin% the applicant before issuin% or renewin% a licence and should have statutory powers to investi%ateD to refuse the %rantin% or renewal of a licence and to suspend or revo?e a licenceD to inFuire into any complaint or alle%ed contravention of the le%islation or code of practice> and reFuire any person to provide any information the licensin% authority considers relevantD to apply to a court for an order to enter relevant premises to search> examine> remove> or ta?e extracts from or obtain copies of any records> boo?s> documents or thin%s which are relevant#

1"#31 Le%islation in other /urisdictions often imposes certain statutory duties on debt collection a%encies# Aor example> debt collection a%encies are reFuired:

to provide the licensin% authority with reports of their financial affairs si%ned by auditorsD to provide the auditors with access to boo?s and records of the businessD to maintain all their records> files> documents> etc created or received in their business for a prescribed period#

1"#3, Collection a%encies in other /urisdictions are sub/ect to trust account reFuirements which may be included either in statutes or in a code of practice# These usually include reFuirements that:

collection a%encies deposit all money collected from debtors in trust accounts maintained in ban?sD 1)+

collection a%encies not withdraw money from trust accounts except for the purpose of deductin% their commission and disbursements and payin% the person on whose behalf the money is receivedD collection a%encies pay such money and interest to the person on whose behalf the money is received within a reasonable time#

1"#30 8ne of the responses raised the Fuery whether a collection a%ency should maintain only one trust account coverin% all creditors> or one account for each creditor# 1e are of the view that the issue is a refinement that could be decided at the implementation sta%e#

R!*o//!&(at%o& ; W! r!*o//!&( t#atG T#! l%*!&+%&$ aut#or%ty +#oul( )! 4!+t!( 9%t# +tatutory "o9!r+G

to /a ! %&Hu%r%!+ r!$ar(%&$ t#! a""l%*a&t )!'or! %++u%&$ or r!&!9%&$ a l%*!&*! a&( +#oul( #a4! +tatutory "o9!r+ to %&4!+t%$at!I to r!'u+! t#! $ra&t%&$ or r!&!9al o' a l%*!&*! a&( to +u+"!&( or r!4o ! a l%*!&*!I to %&Hu%r! %&to a&y *o/"la%&t or all!$!( *o&tra4!&t%o& o' t#! l!$%+lat%o& or *o(! o' "ra*t%*!> a&( r!Hu%r! a&y "!r+o& to "ro4%(! a&y %&'or/at%o& t#! l%*!&+%&$ aut#or%ty *o&+%(!r+ r!l!4a&tI to a""ly to a *ourt 'or a& or(!r to !&t!r r!l!4a&t "r!/%+!+ to +!ar*#> !0a/%&!> r!/o4!> or ta ! !0tra*t+ 'ro/ or o)ta%& *o"%!+ o' a&y r!*or(+> )oo +> (o*u/!&t+ or t#%&$+ 9#%*# ar! r!l!4a&t.

C!rta%& +tatutory (ut%!+ +#oul( )! %/"o+!( o& (!)t *oll!*t%o& a$!&*%!+G

to "ro4%(! t#! l%*!&+%&$ aut#or%ty 9%t# r!"ort+ o' t#!%r '%&a&*%al a''a%r+ +%$&!( )y au(%tor+I to "ro4%(! t#! au(%tor+ 9%t# a**!++ to )oo + a&( r!*or(+ o' t#! )u+%&!++I

1)!

to /a%&ta%& all t#!%r r!*or(+> '%l!+> (o*u/!&t+> !t* *r!at!( or r!*!%4!( %& t#!%r )u+%&!++ 'or a "r!+*r%)!( "!r%o(I to (!"o+%t all /o&!y *oll!*t!( 'ro/ (!)tor+ %& tru+t+ a**ou&t+ /a%&ta%&!( %& )a& +. T#%+> #o9!4!r> (o!+ &ot "r!*lu(! (%r!*t "ay/!&t o' 'u&(+ )y t#! (!)tor %&to t#! *r!(%tor=+ o9& a**ou&t.

Co(! o' "ra*t%*!

1"#3) In the Consultation 5aper> the 'ub(committee recommended that a code of practice should be formulated in tandem with the licensin% system specifically to address the nuisance(type of debt collection activities# Aurther> that provision should be made that a breach of the code of practice by a licensed debt collector mi%ht lead to the suspension or revocation of the licence# It was recommended that the code of practice should be drawn up by the licensin% authority after consultation with mar?et operators and a review of similar codes of practice adopted in other /urisdictions# 6esponses 1"#3* 9 total of 1! responses were received on this recommendation# .early all of them supported the proposal for such a code of practice> thou%h some credit providers and debt collection a%encies expressed a concern that the code should not be overly restrictive# The responses also revealed a %eneral preference for more detail rather than less# ui+elines of the *ustr%li%n (ompetition %n+ (onsumer (ommission 1"#33 The 9ustralian Competition and Consumer Commission 6Gthe 9CCCH7 saw the need to formulate some %uidelines on debt collection in 1 6Gthe 9CCC %uidelinesH7# The 9CCC %uidelines do not have le%al force# $owever> full compliance with the %uidelines can help minimise the ris? of breachin% the law# 1"#3+ The 9CCC %uidelines contain conduct principles on the followin% aspects of debt collection: 6i7 6ii7 6iii7 6iv7 6v7 communicatin% with the debtor at his wor?placeD communicatin% with the debtor away from his wor?placeD personal visitsD freFuency of communicationsD allowin% informal repayment arran%ements and le%al processes

1)

6vi7 6vii7 6viii7 6ix7 6x7

to wor?D communicatin% with a debtorJs representativesD communicatin% with third partiesD misleadin% or deceptive conductD coercionD and lan%ua%e> violence> and physical force#

1"#3! Examples are then %iven in respect of the conduct principles# In relation to Kcommunicatin% with the debtor at his wor?placeJ> for example> the conduct principle states that: @Collectors should attempt to communicate $ith debtors outside of $or $here appropriate and possible/ particularly for initial contactsA K Debtors should be able to request that no communications be made at the $or place/ provided that an alternative and effective contact mechanism is availableAB Examples are then supplied to illustrate the conduct principle: 9 collector should not communicate with a debtor at the wor?place> or visit the debtor at the wor?place unless: the debtor is the proprietor or director of a corporate proprietor of a business to which the debt relatesD or the debtor has not provided an alternative and effective contact mechanismD or the debtor has specifically reFuested communications to be made at the wor?place# or authorised

1"#3 In relation to Kcommunicatin% with the debtor away from his wor?placeJ> the conduct principle stated is: @A collector has a right to communicate $ith a debtor to facilitate collectionA Ho$ever/ all communications should be made for reasonable purposes/ and the debtors should not be unduly harassed/ or sub%ect to communications at unreasonable hoursAT 'ome of the examples %iven are:

9 collector can assume that the convenient time for communicatin% with a debtor is after +#0" a#m# and before #"" p#m# local time at the debtorJs location> unless the collector is informed otherwise# 9 collector should not attempt to communicate with a debtor before +#0" a#m# or after #"" p#m# unless either the debtor has

1*"

authorised it> or the collector has made reasonable efforts> over a reasonable period of time> to contact the debtor durin% the permitted hours> and the collector has made reasonable attempts to contact the debtor usin% other less intrusive methods of communication#

9 collector should not communicate with a debtor at any time or place where the debtor has reFuested that no communication be made> unless the debtor has not provided an alternate and effective contact mechanism> or the debtor does not respond throu%h the a%reed contact mechanism within a reasonable time#

1"#+" In relation to KfreFuency of communicationsJ> the conduct principle stated is: @Collectors are entitled to ma e reasonable efforts to contact debtorsD ho$ever/ debtors are entitled to be free from unnecessary communicationsA K 8hether frequency of communication is considered to be reasonable $ill be assessed in light of the purpose of the communicationsAB 'ome of the examples %iven are:

9 collector should not ma?e more than three unsolicited 6answered7 telephone calls per wee? to a debtor> or more than 1" unsolicited telephone calls per calendar month to a debtor unless they can show a le%itimate reason for doin% so# 9 collector should not ma?e unsolicited visits to a debtor more freFuently than is reasonable and necessary> and no more than once per wee?#

1"#+1 9lthou%h not every conduct principle and example may be considered appropriate to $on% &on%Js circumstances by the authority under the proposed licensin% system> the 9CCC %uidelines are a model that we believe are worthy of consideration# The full %uidelines are annexed to this Report# 9nother set of %uidelines that is worthy of consideration is the code of practice formulated by the Credit 'ervices 9ssociation Ltd> which is the trade association for debt collectors in the <nited &in%dom# Copy of their %uidelines may be obtained by writin% to Ensi%n $ouse> *3 Thorpe Road> .orwich .R1 1RE> <nited &in%dom# 1"#+, In the li%ht of the fore%oin%> we recommend that the licensin% authority be reFuired to formulate a code of practice for debt collection followin% consultation with representative bodies of credit providers> debt collectors> consumers and other relevant bodies# 'uch a code should provide practical %uidance on the standard of conduct that individual and corporate debt collectors are expected to meet# 1*1

1"#+0 1ith re%ard to the status of the proposed code of practice and the conseFuences of breach of the code> various options are available: 6a7 6b7 9 code may be of an advisory character and for %uidance only and therefore no conseFuence will flow directly from a breach# *+ Aailure to observe the provisions of any such code shall not of itself render that person liable to criminal proceedin%s of any ?ind> but any such failure may> in any civil or criminal proceedin%s and includin% proceedin%s for an offence under this 8rdinance> be relied upon by any party to the proceedin%s as tendin% to establish or to ne%ative any liability which is in Fuestion in those proceedin%s#*! 9lthou%h failure to comply with a code shall not of itself render a person liable to any criminal or civil proceedin%s> the code shall be admissible in evidence in all criminal and civil proceedin%sD and if any provision of the code appears to the court or tribunal conductin% the proceedin%s to be relevant to any Fuestion arisin%> it shall be ta?en into account in determinin% that Fuestion#* Breach of a code may be ta?en into account in disciplinary proceedin%s althou%h a breach does not of itself constitute unprofessional conduct#3" Evidence of breach of a code may be relied on by the prosecution as tendin% to establish the %uilt of a person in proceedin%s for an offence a%ainst an ordinance under which the code is issued#31 Conversely> evidence of compliance with a code may constitute a defence in some cases# It may be desirable to state that compliance with a code is not the only way a provision may be complied with#3,

6c7

6d7

6e7

6f7

*+

*! * 3"

31

3,

CC Thornton> !egislative Drafting/ )th edition> at pa%e ,)+# Aor example: G9 failure of a person to follow any %uidance contained in a code issued under this section does not of itself render that person liable to proceedin%s of any ?indH# 'ection 0+6,7 9ir 5ollution Control 8rdinance 6Cap 0117# <& 5olice and Criminal Evidence 9ct 1 !) sections 33> 3+# 'ection 1 6)7 <& Chiropractors 9ct 1 ): G1here any person is alle%ed to have failed to comply with any provision of the Code> that failure 6a7 shall not be ta?en> of itself> to constitute unacceptable professional conduct on his partD but 6b7 shall be ta?en into account in any proceedin%s a%ainst him under this 9ct#H GIf in a proceedin% a%ainst a person for a contravention of a provision of this 9ct it is shown that the person failed at a material time to follow any %uidance contained in a code issued under this section> bein% %uidance relevant to the provision concerned> that failure may be relied on by the prosecution as tendin% to establish the personJs %uilt#H Thornton> cited above# GIf it is alle%ed in a proceedin% that a person has contravened a provision of this 68rdinance7 in relation to which a code of practice was in effect at the time of the alle%ed contravention> the code of practice is admissible in evidence in that proceedin% and proof that the person complied with the relevant provision of the code or complied with the provision of the 68rdinance7 otherwise than observin% that provision of the code of practice is a satisfactory

1*,

6%7

Breach may be ta?en into account in consideration of the cancellation or suspension of> or failure to renew a licence#

1"#+) It is also possible to %ive the code statutory status by reFuirin% the code to be approved or laid before the le%islature> as in section 1+ of the <& Aood and Environment 5rotection 9ct 1 !*# 1"#+* 9nother option is the model adopted for the Code of 5ractice on Consumer Credit -ata issued pursuant to 5art III of the 5ersonal -ata 65rivacy7 8rdinance 6Cap )!37# 'ection 1, of the 8rdinance empowers the 5rivacy Commissioner for 5ersonal -ata to issue codes of practice Gfor the purpose of providin% practical %uidance in respect of any reFuirements under this 8rdinance imposed on data usersH# The Code itself is non(statutory and a breach of the Code by a data user will %ive rise to a presumption a%ainst the data user in any le%al proceedin%s under the 8rdinance# 'ection 10 of the 8rdinance provides that: 6a7 6b7 6c7 where a Code of 5ractice has been issued in relation to any reFuirement of the 8rdinanceD the proof of a particular matter is essential for provin% a contravention of that reFuirementD the specified body conductin% the proceedin%s 6a ma%istrate> a court or the 9dministrative 9ppeals Board7 considers that any particular provision of the Code of 5ractice is relevant to that essential matterD and if it is proved that that provision of the Code of 5ractice has not been observedD

6d7

then that essential matter shall be ta?en as proved unless there is evidence that the reFuirement of the 8rdinance was actually complied with in a different way> notwithstandin% the non(observance of the Code of 5ractice# 1"#+3 The conseFuences for breach of the proposed code of practice will have to be formulated in tandem with the content of the code# Codes of practice usually adopt a more discursive style> a looser structure> with more practical detail# $owever> the de%ree of looseness and informality that is appropriate will depend on the conseFuences of a breach of a code in that> the more serious the conseFuences> the ti%hter the lan%ua%e will need to be# 30 1"#++ 1e further recommend that breach of the code may in an appropriate case> entitle the authority to revo?e> suspend or decline to renew the licence of the party in breach> and also to impose other penalties> such as reprimands3) and fines#
30 3)

defenceH# CC Thornton> cited above> at pa%e ,)3# The $on% &on% =onetary 9uthority> for example> does not have any specific power under the Ban?in% 8rdinance to disclose the names of individual ban?s a%ainst which debt collection complaints are made# -isclosin% the names of debt collection a%encies which have

1*0

R!*o//!&(at%o& -0 W! r!*o//!&( t#atG T#! l%*!&+%&$ aut#or%ty +#oul( )! r!Hu%r!( to 'or/ulat! a *o(! o' "ra*t%*! 'or (!)t *oll!*t%o& 'ollo9%&$ *o&+ultat%o& 9%t# r!"r!+!&tat%4! )o(%!+ o' *r!(%t "ro4%(!r+> (!)t *oll!*tor+> *o&+u/!r+ a&( ot#!r r!l!4a&t )o(%!+. Su*# a *o(! +#oul( "ro4%(! "ra*t%*al $u%(a&*! o& t#! +ta&(ar( o' *o&(u*t t#at %&(%4%(ual a&( *or"orat! (!)t *oll!*tor+ ar! !0"!*t!( to /!!t. T#! *o&+!Hu!&*!+ o' )r!a*# o' t#! *o(! +#oul( )! 'or/ulat!( )y t#! r!l!4a&t aut#or%ty 'ollo9%&$ *o&+ultat%o& a+ a'or!+a%(> a&( #a4%&$ r!$ar( to t#! *o&t!&t+ o' t#! *o(!. W! 'urt#!r r!*o//!&( t#at> %& a& a""ro"r%at! *a+!> )r!a*# o' t#! *o(! +#oul( !&t%tl! t#! aut#or%ty to r!4o !> +u+"!&( or (!*l%&! to r!&!9 t#! l%*!&*! o' t#! "arty %& )r!a*#> a&( to %/"o+! ot#!r "!&alt%!+ +u*# a+ r!"r%/a&(+ a&( '%&!+.

Co&+u/!r *r!(%t (ata

1"#+! In the Consultation 5aper> the 'ub(committee had reviewed the types of positive credit data available to credit providers in other /urisdictions# 3* The 'ub(committee ur%ed the relevant authorities to review the then existin% limitations imposed on the collection and use of certain positive credit data from the an%le of alleviatin% bad debts and abusive debt collection practices# The 'ub(committee also ur%ed credit providers to ma?e efforts to increase the sharin% of information throu%h credit reference a%encies# 33

6esponses
1"#+ The 'ub(committee received ,! responses on this recommendation concernin% allowin% %reater freedom in the collection and use of consumer credit data# 8f these responses> ," supported the recommendation# 1e note that ! amon% the ," responses in favour of the recommendation were from the KsmallerJ credit providers who would stand to benefit most from increased information sharin%# Responses that expressed reservations did so on privacy %rounds#

3* 33

en%a%ed in abusive debt collection practices would not only help to curb malpractices> it would be useful to creditors in their selection of debt collection a%encies# 'ee Chapter and para%raph #3# 'ee foot(note , in Chapter for definition of credit reference a%ency#

1*)

R!4%+%o& to t#! Co(! o' Pra*t%*! o& Co&+u/!r Cr!(%t Data ; 2002
1"#!" 'ubseFuent to the 'ub(committeeJs Consultation 5aper> the 5rivacy Commissioner for 5ersonal -ata has recently completed a review of the Code of 5ractice on Consumer Credit -ata 6Gthe CodeH7 which first too? effect in 1 !#3+ The revised Code too? effect in =arch ,"",# 1"#!1 The revised Code has brou%ht about a considerable increase in the scope of data that credit reference a%encies are allowed to hold> and we welcome these chan%es#

(re+it %ppli$%tion +%t%

1"#!, Before the revision> credit application data were allowed to be retained by the credit reference a%ency for only " days from the date of application# Therefore> if an individual applies for a new credit card or other credit facilities every " days> no warnin% si%nal will be revealed even if a ban? conducts a credit chec? on the individual# Coupled with the fact that data on the repayment manner3! of the individual are not allowed to be collected> an individual who chooses to pay only the *I minimum repayment amount of his credit card bills will be able to rely on new credit to repay the outstandin% amount for a number of years# By then> the debt incurred by the individual may well be unmana%eable# 9s shown in the table in Chapter 1> 3 the avera%e number of delinFuent records per consumer was only 1#0+ in the second half of 1 +# The fi%ure %rew to )#*, in the second half of ,"""> and then eased off a little to )#") in the first half of ,""1# This shows the problem of individuals incurrin% multiple debts has %rown several(folds in the last few years# 1"#!0 1ith the revised Code> instead of " days> credit application data are allowed to be retained by the credit reference a%ency for * years# +" This would %o some way to enable credit providers in identifyin% individuals who may have or are havin% difficulty in mana%in% their finances#

1ile %$tivit& +%t%

1"#!) Every time a credit provider reFuests access to an individualJs personal data held by the credit reference a%ency> it will be recorded in the system# 9 credit provider may access the data in a number of cases> for example> when it is considerin% the %rant or renewal of credit facilities to the individual> or when it reFuires assistance in debt collection action#
3+ 3! 3 +"

'ee para%raphs #0 ; #+# 'ee the table in para%raph #3# 'ee para%raph 1#0# .ote> however> that credit application data which are created more than , years can be used only for %eneratin% consumer credit scorin%D that is> raw data over , years old cannot be released directly to the credit provider#

1**

1"#!* Before the revision of the Code> file activity data are released only to the relevant individual himself# .ow> file activity data can also be released to credit providers#+1

(onsumer $re+it s$oring

1"#!3 GConsumer credit scorin%H means the process whereby personal data relatin% to an individual held in the record system of a credit reference a%ency 6bein% information statistically validated to be predictive of future payment behaviour or the de%ree of ris? of delinFuency or default associated with the provision or continued provision of consumer credit7 are used> either separately or in con/unction with other information held in the system> for the purpose of %eneratin% a score to be included in a credit report on the individual# 1"#!+ In order to address the privacy concerns raised re%ardin% the disclosure of raw data of an individual for up to * years a%o> the Code allows the release of a processed statistical score in the form of hi%h> medium or low ris?s indicatin% an individualJs li?ely ability of fulfillin% repayment obli%ations in future# The rationale is that each individual will be %iven an ob/ective assessment based on oneJs own current and historical information> and ta?in% into account the analysis of thousands of individuals with similar financial characteristics#

Len+ersF p%rti$ip%tion in the sh%ring of inform%tion

1"#!! In the past> the problem of inadeFuate credit data was exacerbated by the policy of some ma/or retail ban?s to limit its supply of data to the credit reference a%encies#+, 1e are pleased to see that positive action has been ta?en in this area# In 'eptember ,""1> a hi%h(level roundtable discussion too? place to discuss the issue of consumer debt and ban?ruptcy# 5articipants of the discussion include representatives from the $on% &on% =onetary 9uthority> the $on% &on% 9ssociation of Ban?s> the -eposit(Ta?in% Companies 9ssociation> the Ainancial 'ervices Bureau> the 8fficial ReceiverJs 8ffice> 5olice and the 8ffice of the 5rivacy Commissioner for 5ersonal -ata# The issue of enhancement of the sharin% of credit data was one of the discussion topics#+0

+1

+,

+0

9lthou%h file activity data can be retained by the credit reference a%ency for * years> data which are created more than , years can be used only for %eneratin% consumer credit scorin%# In other words> raw data on file activity over , years old cannot be released directly to the credit provider# 9ccordin% to information from Credit Information 'ervices Ltd#> a credit reference a%ency> althou%h there are over one hundred licensed ban?s in $on% &on%> several ma/or players are dominatin% the mar?et# 1ith re%ard to credit card business> three ma/or ban?s dominate 3"I to +"I of the mar?et share# $ence> they may not re%ard sharin% information with other competitors as to their advanta%e# 8ther issues include a debt relief plan> ti%htenin% ban?sJ lendin% policy> and enhancement of cooperation between ban?s and %overnment departments#

1*3

1"#! 1e note that the $on% &on% =onetary 9uthority has in its paper dated 9pril ,"", to the Le%islative Council 5anel on Ainancial 9ffairs set out the %rounds for increased sharin% of positive consumer credit data in the ban?in% sector# The paper mentioned that the $on% &on% 9ssociation of Ban?s> the -eposit(ta?in% Companies 9ssociation> the '9R Licensed =oney Lenders 9ssociation Ltd and the Ainance $ouses 9ssociation have now reached consensus in devisin% an KIndustry 5roposalJ#

7%& forw%r+
1"# " The $on% &on% =onetary 9uthorityJs paper to the Le%islative Council 5anel on Ainancial 9ffairs also mentioned that G'han%hai has already launched a comprehensive credit bureau> and the Chinese authorities are now plannin% to establish a centralised credit bureau for the whole country# 'in%apore also intends to do so in 'eptember ,"",H# 1e are pleased to see that considerable efforts and pro%ress have been and still are bein% made to enhance the sharin% of consumer credit data# 1ithout adeFuate positive credit data> credit mana%ers can only rely on a individualJs income proof to assess his credit position# 9ssessment as such may not be accurate as the individualJs credit position depends also on the amount of his indebtedness and his past repayment record# In other words> a person with a hi%h level of income may not necessarily be re%arded as havin% a hi%h level of credit worthiness> and vice versa# 1"# 1 9s from the consumersJ point of view> whilst some consumers are s?eptical of increased sharin% of their data due to privacy reasons> others may well benefit from more preferential treatment in terms of lower interest rates> better service and other favourable terms if their %ood repayment records are made available to credit reference a%encies# 9ccordin% to the estimation of Credit Information 'ervices Ltd#> at least *I of the consumers in $on% &on% have %ood repayment recordsD that is> without any ne%ative or dero%atory credit data# <nli?e other countries where positive credit data> +) is available> consumer lendin% in $on% &on% is not priced based on individual ris?# Credit providers price their financial products based on total ris? exposure> which means that the *I %ood consumers are subsidisin% the *I delinFuent consumers#+* 1"# , 1e appreciate that there are understandable concerns from consumer and privacy bodies about the potential misuse of personal data# These are le%itimate issues that need to be addressed# It is perhaps beneficial to all concerned that this issue should be ?ept under review so that the sharin% of positive data may be expanded on a %radual incremental basis#

R!*o//!&(at%o& --

+) +*

5ositive credit data includes repayment manner> and a%%re%ate credit exposure# 4iews expressed by Credit Information 'ervices Ltd#

1*+

W! r!*o//!&( t#atG W#%l+t 9! 9!l*o/! t#! "ro$r!++ /a(! %& t!r/+ o' !0"a&(%&$ t#! +#ar%&$ o' *o&+u/!r *r!(%t (ata> t#! /att!r +#oul( )! !"t u&(!r r!4%!9 9%t# a 4%!9 to 'urt#!r all!4%at! )a( (!)t+ a&( a)u+%4! (!)t *oll!*t%o& "ra*t%*!+.

E''%*%!&*y o' t#! 2u(%*%al "ro*!++

1"# 0 -urin% the course of the 'ub(committeeJs deliberation> views were submitted to the effect that the lon%(term solution to the problem of abusive debt collection lies in stren%thenin% the /udicial process both in terms of ad/udication of debts and enforcement of /ud%ments> so that creditors will rely more on the /udicial process than collection a%encies to collect debts#

6esponses
1"# ) Thirteen responses were received in relation to the issue of efficiency of the /udicial process# Ei%ht have expressed the view that abusive debt collection practices could be alleviated if the /udicial process could be stren%thened both in terms of ad/udication and enforcement# 9 number of these were credit providers who further mentioned that they would prefer to utilise the /udicial process to collect their debts if le%al action could be speedier and less costly# 1"# * 8ne of the responses noted the recent reforms in the /udicial system> includin% the increase of /urisdiction in the 'mall Claims Tribunal and the -istrict Court> computer(assisted listin% procedures> and the %reater use of Chinese in courts# It was remar?ed that as a result of the reforms> many creditors are now more inclined to use the /udicial process for recoverin% their debts#

Bnterim 6eport %n+ (onsult%tive #%per on (ivil "usti$e 6eform -e$em?er 233D
1"# 3 In -ecember ,""1> the Chief JusticeJs 1or?in% 5arty on Civil Justice Reform issued an Interim Report and Consultative 5aper on Civil Justice Reform on the followin% terms of reference: @To revie$ the civil rules and procedures of the High Court and to recommend changes thereto $ith a vie$ to ensuring and improving access to %ustice at reasonable cost and speedAB 1"# + In view of the comprehensive nature of this review> and further in view that the issue is beyond the ambits of our terms of reference> we do not propose to ma?e recommendations on this issue#

1*!

S!l'1r!$ulat%o&
1"# ! 1e have considered the possibility of encoura%in% self( re%ulation amon%st debt collection a%encies to solve the problem of abusive collection practices# 9dvocates of self(re%ulation mentioned as an example the Code of Ban?in% 5ractice +3 which applies to ban?s and deposit(ta?in% companies on a voluntary basis# It is su%%ested that it is worth explorin% whether a similar code may be developed to cover not only ban?s> but also tradin%> mobile telephone and credit card companies to promote some %uidelines on fair trade practices for debt collection# 'elf(re%ulatin% associations for debt collection a%encies are operatin% in the <nited &in%dom>++ the <nited 'tates+! and other countries#+ In $on% &on%> we learnt that the $on% &on% Credit and Collection =ana%ement 9ssociation was set up in -ecember 1 as an industry association#

6esponses
1"# 8nly four responses were received on this issue# These were from a credit card company> a credit investi%ationLdebt collection company> a district councillor> and the Consumer Council# 9ll four responses were in favour of encoura%in% self(re%ulation# 1"#1"" 9lthou%h self(re%ulation alone would not be sufficient to totally safe%uard the interest of the wider community> an industry association can often wor? in tandem with a %overnment(funded authority to ma?e enforcement of le%islative standards more effective> for example> by disseminatin% information amon%st members on how to best observe le%islative standards> and by operatin% trainin% courses# !" 1e a%ree that self( re%ulation could serve a purpose in enhancin% professionalism amon%st its members and the relevant authorities should render necessary assistance#

Co&*lu+%o&
1"#1"1 1e believe that our proposals would %o some way to address the problem of abusive debt collection# 1e have devised a criminal offence of harassment of debtors and others to deal with the bottom end of debt collection a%encies while the recommendations on licensin% and a code of practice are aimed at re%ulatin% the avera%e collection a%encies# The top end of collection a%encies will benefit from the more level playin% field> which hopefully would encoura%e more collection a%encies to operate at the top end of the mar?et# The recommendation on consumer credit data aims to improve
+3 ++

+! + !"

'ee para%raphs *#0 ; *#+# The Credit 'ervices 9ssociation Ltd of Ensi%n $ouse> *3 Thorpe Road> .orwich> is the trade association for debt collectors in the <nited &in%dom# .on(compliance with the code of practice may result in the matter bein% referred to a specially convened disciplinary committee for consideration and action# 9mon% other powers> the disciplinary committee can issue a warnin% or a recommendation of expulsion from membership# 9merican Collectors 9ssociation# Aor example> the 9ustralian CollectorsJ 9ssociation# 9lso> the LeaFue International for Creditors in Cermany# 4iews of the Consumer Council#

1*

the credit ori%ination process# It is hoped that the level of bad debts> and hence> abusive debt collection> can be alleviated#

13"

C#a"t!r -Su//ary o' r!*o//!&(at%o&+

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

6The recommendations of this report are to be found in Chapter 1"7 R!*o//!&(at%o& - G T#! *r%/%&al o''!&*! o' u&la9'ul #ara++/!&t o' (!)tor+ a&( ot#!r+ A"ara$ra"#+ -0.5 < -0.20B 9 criminal offence of harassment of debtors and others should be created> such that it would be an offence if a person> with the ob/ect of coercin% another person to repay a debt ; 6a7 harasses the other with demands for payment which> in respect of their freFuency or the manner or occasion of ma?in% any such demand> or of any threat or publicity by which any demand is accompanied> are li?ely to sub/ect him or members of his family or household or any other person to alarm> distress or humiliationD 6b7 falsely represents> in relation to the money claimed> that criminal proceedin%s lie for failure to pay itD 6c7 falsely represents himself to be authorised in some official capacity to claim or enforce paymentD or 6d7 utters a document falsely represented by him to have some official character or purportin% to have some official character which he ?nows it has not# 1ithout affectin% the %enerality of para%raph 6a7> provision should be made that if any person in ma?in% demands for payment sends to another a letter or any article which : 6i7 is> in whole or in part> of an indecent or %rossly offensive natureD or 6ii7 conveys information which is false and ?nown or believed to be false by the sender> this would also constitute harassment# 5rovision should also be made for para%raph 6a7 to have no application in respect of anythin% done which is reasonable for the purpose of either securin% the dischar%e of an obli%ation due> or believed to be due> or for the enforcement of any liability by le%al process# Aurther> that a person may be %uilty of an offence by virtue of para%raph 6a7 above if he concerts with others in the ta?in% of such action as is described in that para%raph> notwithstandin% that his own

131

course of conduct does not by itself amount to harassment# Express provision should be made to ensure that harassment and representations conveyed by electronic means of communication are covered by the proposed offence# R!*o//!&(at%o& 2 G L%*!&+%&$ A"ara$ra"#+ -0.2- < -0.2:B -ebt collection a%encies should be sub/ect to a statutory licensin% system under which it should be a criminal offence to collect debts as a business without a valid licence# R!*o//!&(at%o& 3 G Co//!r*%al 4+ *o&+u/!r (!)t+ A"ara$ra"#+ -0.2; < -0.3-B The proposed licensin% re%ime should cover both consumer debts and commercial debts# R!*o//!&(at%o& 5 G L%*!&+%&$ aut#or%ty -0.35B A"ara$ra"#+ -0.32 <

The 9dministration should have due re%ard to the experience of other /urisdictions in determinin% the appropriate body to carry out the licensin% of debt collectors and in devisin% an efficient and cost(effective licensin% re%ime# R!*o//!&(at%o& 6 G Coll!*t%o& a$!&*%!+ a&( A"ara$ra"#+ -0.36 < -0.3:B *oll!*tor+

The licensin% reFuirement of the proposed statutory licensin% re%ime should include individual debt collectors as well as debt collection a%encies> but support staff of collection a%encies who are not involved in communicatin% with any debtors> referees or their families and friends> would not reFuire licensin%# Communication in this context includes written> verbal> electronic and personal visits forms of communication# R!*o//!&(at%o& 7 G E0!/"t%o&+ 'ro/ l%*!&+%&$ A"ara$ra"#+ -0.3; < -0.57B The cate%ories of creditors and persons listed below be exempted from the reFuirement to obtain a licence under the proposed licensin%
13,

scheme for debt collectors: 6i7 a creditor collectin% his own debt> provided he did not become a creditor by an assi%nment of the debtD 6ii7 a creditor who became a creditor by virtue of an assi%nment of debt> provided the assi%nment was made in connection with a transfer of business> other than a debt collectin% businessD 6iii7 le%al officers> as defined in section , of the Le%al 8fficers 8rdinance 6Cap !+7D 6iv7 barristers actin% in that capacityD 6v7 solicitors actin% in that capacityD 6vi7 receivers> liFuidators and trustees in ban?ruptcyD 6vii7 court bailiffsD 6viii7 authori:ed institutions> as defined in the Ban?in% 8rdinance 6Cap 1**7# 5rovision be made for particular or%anisations to be exempted from the licensin% reFuirement by inclusion in a list in the le%islation that is sub/ect to amendment by a suitable body or official# R!*o//!&(at%o& 8 G Coll!*t%&$ (!)t+ a+ a )u+%&!++ or ot#!r9%+! A"ara$ra"#+ -0.58 < -0.5:B 8nly a person or corporation carryin% on business as a debt collector in $on% &on%> or advertisin%> announcin% or holdin% itself out as so conductin% itself> should reFuire to be licensed under the proposed licensin% scheme# The %eneral law may be relied upon to determine what constitutes carryin% on business in this context# R!*o//!&(at%o& : G Cr%t!r%a 'or l%*!&+%&$ A"ara$ra"#+ -0.5; < -0.68B 9n applicant for the %rantin% or renewal of a debt collection licence should be reFuired to satisfy the licensin% authority that it> in the case of a corporate applicant> or he> in the case of an individual applicant> is a fit and proper person to en%a%e in debt collection activities> havin% re%ard to all relevant circumstances> and in particular whether the applicant> and> in the case of a corporate applicant> his employees> a%ents or associates have ; 6a7 6b7 6c7 contravened the offence of unlawful harassment of debtors and others> or any offence involvin% fraud or dishonesty> or violenceD committed any triad(related offencesD carried on business under a name which is misleadin% or otherwise undesirableD or
130

6d7

committed any breach of code of practice#

In addition> an individual debt collector should be reFuired to be at least 1! years of a%e> and a resident of $on% &on%# 9s for a corporate applicant> it should be reFuired to provide suitable trainin% to its collection staff and to formulate effective supervisory methods# 9n appropriate appeal mechanism a%ainst the decision of the licensin% authority should also be devised# R!*o//!&(at%o& ; G Statutory "o9!r+ a&( (ut%!+ A"ara$ra"#+ -0.6: < -0.73B The licensin% authority should be vested with statutory powers:

to ma?e inFuiries re%ardin% the applicant before issuin% or renewin% a licence and should have statutory powers to investi%ateD to refuse the %rantin% or renewal of a licence and to suspend or revo?e a licenceD to inFuire into any complaint or alle%ed contravention of the le%islation or code of practice> and reFuire any person to provide any information the licensin% authority considers relevantD to apply to a court for an order to enter relevant premises to search> examine> remove> or ta?e extracts from or obtain copies of any records> boo?s> documents or thin%s which are relevant#

Certain statutory duties should be imposed on debt collection a%encies:

to provide the licensin% authority with reports of their financial affairs si%ned by auditorsD to provide the auditors with access to boo?s and records of the businessD to maintain all their records> files> documents> etc created or received in their business for a prescribed periodD to deposit all money collected from debtors in trusts accounts maintained in ban?s# This> however> does not preclude direct payment of funds by the debtor into the creditorJs own account#

13)

R!*o//!&(at%o& -0 G Co(! o' "ra*t%*! A"ara$ra"#+ -0.75 < -0.88B The licensin% authority should be reFuired to formulate a code of practice for debt collection followin% consultation with representative bodies of credit providers> debt collectors> consumers and other relevant bodies# 'uch a code should provide practical %uidance on the standard of conduct that individual and corporate debt collectors are expected to meet# The conseFuences of breach of the code should be formulated by the relevant authority followin% consultation as aforesaid> and havin% re%ard to the contents of the code# 1e further recommend that> in an appropriate case> breach of the code should entitle the authority to revo?e> suspend or decline to renew the licence of the party in breach> and to impose other penalties such as reprimands and fines# R!*o//!&(at%o& -- G Co&+u/!r *r!(%t (ata A"ara$ra"#+ -0.8: < -0.;2B 1hilst we welcome the pro%ress made in terms of expandin% the sharin% of consumer credit data> the matter should be ?ept under review with a view to further alleviate bad debts and abusive debt collection practices#

13*

A&&!0 -

R!+"o&+!+ to Co&+ultat%o& Pa"!r o& R!$ulat%o& o' D!)t Coll!*t%o& Pra*t%*!+

1# ,# 0# )# *# 3# +# !# # 1"# 11# 1,# 10# 1)# 1*# 13# 1+# 1!# 1 # ,"# ,1# ,,# ,0# ,)# ,*# ,3# ,+# ,!# , # 0"#

9dministration 1in%> Chief 'ecretary for 9dministrationJs 8ffice 9IC Credit Card Company 6$&7 Ltd 9merican Collectors 9ssociation> Inc 9merican Express Ban?> Ltd# $on% &on% 9merican Express International> Inc# B8C Credit Card 6International7 Ltd Carlye Chu> $i%h Court Re%istrar CEA Lend Lease Life 9ssurance Limited Chase =anhattan Card Company Limited Citiban? . 9> $on% &on% Citi:ens 5arty Commercial Credit Bureau Ltd Communication Business Consultin% Ltd Ris? =ana%ement 9dvisors Ltd Consumer Council Credit Information 'ervices Limited -ao $en% Ban? Ltd debis Ainancial 'ervices China Limited -emocratic 9lliance for Betterment of $on% &on% -enis 1 ' Lau 6=a%istrate> &wun Ton% =a%istracy7 -epartment of Justice> Civil -ivision -epartment of Justice> 5rosecutions -ivision 6John Readin%7 -TC 9ssociation -un @ Bradstreet 6$&7 Ltd Economic 'ervices Bureau Ai%ht Crime Committee Ainance $ouses 9ssociation of $on% &on% Limited Ainancial 'ervices Bureau $enry Aun% $&'9R Licensed =oney Lenders 9ssociation Ltd $o Chi Cheun%

133

01# 0,# 00# 0)# 0*# 03# 0+# 0!# 0 # )"# )1# ),# )0# ))# )*# )3# )+# )!# ) # *"# *1# *,# *0# *)# **# *3# *+# *!# * # 3"# 31# 3,# 30#

$ome 9ffairs Bureau $ome 9ffairs -epartment $on% &on% 9ssociation of Ban?s $on% &on% Bar 9ssociation $on% &on% City Credit =ana%ement Ltd $on% &on% Credit and Collection =ana%ement 9ssociation Ltd $on% &on% =onetary 9uthority $on% &on% 5olice Aorce $utchison Telephone Company Ltd InformLin? Consultancy Ltd International Ban? of 9sia Limited Judiciary 9dministratorJs 8ffice &wun Ton% Resident 9ssociation Law 'ociety of $on% &on% Life Insurance Council of the $on% &on% Aederation of Insurers =aster Christine Barbara Chan> $i%h Court .ew Territories 1est -istrict Residents 9ssociation Ltd .ew 1orld 5C' Limited .oble Aund Limited 8ffice of the 5rivacy Commissioner for 5ersonal -ata 5rimeCredit Limited Rich 5rosper Limited Robertsons 6'olicitors actin% for Cold 5artners Credit =ana%ement Limited7 'ecurity Bureau 'ham 'hui 5o -istrict Ai%ht Crime Committee 'ocial 1elfare -epartment 'ocial 1elfare -epartment 1or?in% Croup on Battered 'pouses Thomas Law 65rosecutions -ivision> -epartment of Justice7 <nited 9sia Ainance Limited 1illiam Lai 6Ceneral =ana%er> $& City Credit =ana%ement Ltd7 1or?in% Committee of 5rofessional Credit =ana%ement Companies in $on% &on% Eau Tsim =on% -istrict Ai%ht Crime Committee Eoun% 'iu Chuen 6=ember> Central @ 1estern -istrict CouncilD =ember> Central @ 1estern -istrict Ai%ht Crime Committee7

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A&&!0 2

ACCC=+ Gu%(!l%&!+
-. Co//u&%*at%&$ 9%t# t#! (!)tor a9ay 'ro/ t#!%r 9or "la*! Pr%&*%"l! 9 collector has a ri%ht to communicate with a debtor to facilitate collection# $owever> all communications should be made for reasonable purposes> and debtors should not be unduly harassed> or sub/ect to communications at unreasonable hours# E0a/"l! J

9 collector should not communicate with a debtor at any unusual time or place> or at any time or place that the collector ?nows or should ?now> would be unreasonable or substantially inconvenient to the debtor unless the debtor has %iven prior consent directly to the collector# 9 collector can assume that the convenient time for communicatin% with a debtor is after +#0" a#m# and before p#m# local time at the debtorJs location> u&l!++ the collector is informed otherwise# 9 collector should not communicate> or attempt to communicate> with a debtor before +#0" a#m# or after p#m# u&l!++:

the debtor authorises communication at other hoursD or the collector has made reasonable efforts> over a reasonable period of time> to contact the debtor after +#0" a#m# and before p#m#> and the collector has made reasonable attempts to contact the debtor usin% other> less intrusive> methods of communication#

9 collector should not communicate with a debtor at any time or place where the debtor has reFuested that no communication be made> or usin% any mechanism that the debtor has reFuested not be used> u&l!++:

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the debtor has not provided an alternate and effective contact mechanismD or the debtor does not respond throu%h the a%reed contact mechanism within a reasonable time#

2.

Co//u&%*at%&$ 9%t# t#! (!)tor at t#! (!)tor=+ 9or "la*! Pr%&*%"l! Collectors should attempt to communicate with debtors outside of wor? where appropriate and possible> particularly for the initial contacts# Collectors should ensure that where communications or visits need to be made to a debtorJs wor?place> those contacts are handled discretely and with care# -ebtors should be able to reFuest that no communications be made at the wor?place> provided that an alternative and effective contact mechanism is available# E0a/"l! J

9 collector should not communicate with a debtor at the wor?place> or visit the debtor at the wor?place u&l!++:

the debtor has specifically reFuested or authorised communications to be made at the wor?placeD or the debtor has not provided an alternate and effective contact mechanismD or the debtor is the proprietor or a director of a corporate proprietor of a business to which the debt relates#

9 collector should not communicate with> or attempt to communicate with> a debtor at the wor?place in a manner that:

is li?ely to inform third parties of the existence of a debtD or discloses more than the name and contact details 6includin% company name only if specifically reFuested by the third party7 of the collector to third parties#

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3.

P!r+o&al 4%+%t+ Pr%&*%"l! 1here necessary a collector is entitled to communicate with the debtor by visitin% in person# $owever> a collector should respect the debtorJs own> and the householdJs privacy and security# Cenerally a collector should not use personal visits as the initial step in communicatin% with the debtor> and personal visits should not be used if other> less intrusive> means of communication are available and effective# E0a/"l! J

9 collector should not visit a debtor in connection with the collection of any debt at any unusual time or place> or any time or place ?nown or which should be ?nown to be substantially inconvenient to the debtor> without the prior consent of the debtor %iven directly to the collector# 9 collector can assume that the convenient time for ma?in% a personal visit to a debtor away from the wor?place is after +#0" a#m# and before p#m# local time at the debtorJs location> u&l!++ the collector is informed otherwise# 9 collector can assume that the convenient time for ma?in% a personal visit to a debtor at the wor?place is durin% normal business hours 6 a#m# to * p#m#7> u&l!++ the collector is informed otherwise#

9 collector should not visit a debtor at the wor?place if the debtor has so reFuested> and has provided an alternative and effective contact mechanism# 9 collector should immediately leave private property or the debtorJs wor?place if reFuested to do so by the debtor or another person# 9 collector should not remain in the vicinity of the debtorJs location for an extended len%th of time for the purpose of:

intimidatin% or embarrassin% a debtorD or creatin% an surveillance# impression that the debtor is under

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5.

Fr!Hu!&*y o' *o//u&%*at%o&+ Pr%&*%"l! Collectors are entitled to ma?e reasonable efforts to contact debtorsD however> debtors are entitled to be free from unnecessary communications# 9 collector should not ma?e unsolicited communications with the debtor more freFuently than is reasonable and necessary accordin% to the circumstances# 1hether freFuency of communication is considered to be reasonable will be assessed in li%ht of the purpose of the communications# E0a/"l! J

9 collector should not ma?e more than three unsolicited 6answered7 telephone calls per wee? to a debtor> or more than 1" unsolicited telephone calls per calendar month to a debtor 6includin% telephone calls where the debtor terminates the call7> unless they can show a le%itimate reason for doin% so# 9 collector should not> in relation to a consumer debt> cause a telephone to rin%> or en%a%e any person in telephone conversation> repeatedly or continuously if it is reasonably li?ely to unduly abuse> or harass the person at the called number# 9 collector should not ma?e unsolicited visits to a debtor more freFuently than is reasonable and necessary> and no more freFuently than once per wee?#

6.

Allo9%&$ arra&$!/!&t+ a&( ot#!r "ro*!++!+ to 9or Pr%&*%"l! 9 collector should %enerally not contact a debtor if an informal arran%ement has been made for payment of the debt> and is bein% complied with> or if other le%al processes or arran%ements exist which ma?e it inappropriate for the debtor to be contacted# E0a/"l! J

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9 collector should not communicate with a debtor whilst an arran%ement to pay is in place and bein% complied with> unless the communication is made:

at the reFuest of the debtorD to confirm the details of the arran%ement and to advise the debtor of the conseFuences of not complyin% with the arran%ementD to provide a statement of the debtorJs accountD to advise the debtor of any le%al remedies the collector intends to pursue whilst the arran%ement is in placeD to ma?e a le%itimate offer of an alternative arran%ement of benefit to the debtorD or to review the arran%ement 6not more freFuently than every three months7#

9 collector should not communicate with a debtor after the debtor has 6in writin%7 denied liability or stated an intention to defend any le%al proceedin%s brou%ht a%ainst them and has reFuested that no further communication be made> except for:

written communication that advises the debtor of the steps the collector intends to ta?e with respect to le%al proceedin%sD written communication that is %enuinely desi%ned to facilitate settlement of the matterD communication with respect to any part of a debt that is not deniedD communication where a /ud%ment for that debt has been obtained a%ainst the debtor> and has not been set asideD or further communication that is authorised by the debtor#

9 collector should not communicate with a debtor or Third party for payment of the debt or to assert a ri%ht for payment once the collector becomes aware that the debtor is ban?rupt or has entered into a 5art IX or 5art X a%reement under the

1+,

Ban?ruptcy 9ct> u&l!++ the communication is in accordance with that 9ct# 7. Co//u&%*at%&$ 9%t# a (!)tor=+ r!"r!+!&tat%4! Pr%&*%"l! 9 debtor is entitled to have another party represent them andLor advocate on their behalf when communicatin% with the collector# In turn> representatives must act reasonably> and the collector should be entitled to contact the debtor directly in appropriate circumstances# E0a/"l! J

9 collector should not communicate directly with a debtor once the collector ?nows> or should ?now> that another person 6e#%# solicitor> financial counsellor7 represents the debtor in the matter> u&l!++:

the debtorJs representative does not respond to communications from the collector within a reasonable time 6normally 1) wor?in% days7D the debtorJs representative advises that he or she does not have instructions from the debtor in respect of this matterD the representative does not consent to actD where the representative is not a solicitor> the collector advises that written authority for the collector to communicate throu%h the debtorJs representative is reFuired> and the debtor does not provide that authorityD or the debtor specifically reFuests communication from the collector#

8.

Co//u&%*at%&$ 9%t# t#%r( "art%!+ Pr%&*%"l! Collectors are entitled to contact third parties in order to facilitate communication with the debtor# $owever> third parties are not liable for the debt> and are under no obli%ation to provide

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information to the collector# They are entitled to similar 6if not %reater7 protection from undue harassment# 9 collector should only ma?e unsolicited communications to third parties as are reasonable and necessary accordin% to the circumstances# 9 collector should not assume that any member of the debtorJs family or household is aware of> or privy to> information about the debt situation> or that the debtor wants such persons to be informed# E0a/"l! J

9 collector should communicate with a third party only in relation to a debt to see? location information or to leave a messa%e for the debtor# 9 collector should not communicate with or visit a third part between the hours of p#m# and +#0" a#m# u&l!++ the communication or visit is authorised by the third party# 9 collector should not repeatedly communicate with a third party to leave a messa%e for the debtor if the collector ?nows or should ?now that the third party does not live or wor? with the debtor> u&l!++:

the third party has a%reed to further contactD or the third party has reFuested the contact#

9 collector should not communicate with a third party to see? location information about the debtor on more than one occasion within a six month period> u&l!++:

the third party has a%reed to further contactD or the third party has reFuested the contact#

9 collector should not ma?e misleadin% or deceptive statements to a third party in order to obtain the debtorJs location or other information about the debtor from that third party# 9 collector should not disclose 6or threaten to disclose7 information about the debt 6includin% the existence of the debt7

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to a third party> u&l!++ disclosure is permitted by the 5rivacy 9ct#

9 collector should not communicate with the debtorJs child or children 6under the a%e of 1!7 about the debt> u&l!++:

communication with that child is specifically authorised by the debtorD or the debtor as?s the child to act as a translator#

:.

M%+l!a(%&$ or (!*!"t%4! *o&(u*t Pr%&*%"l! 9 collector must not en%a%e in any other conduct that is misleadin% or deceptive or is li?ely to mislead or deceive# E0a/"l! J

9 collector must not ma?e a false or misleadin% representation about the nature of a collectorJs identity# 9 collector must not ma?e a false or misleadin% representation about the conseFuences of non(payment# $owever> a collector is entitled to accurately explain the conseFuences of non(payment# 9 collector must not %ive information about the conseFuences of le%al action that is misleadin% or deceptive or li?ely to mislead or deceive# $owever> a collector is entitled to accurately explain the conseFuences of le%al action# 9 collector must not use documents that could mislead the debtor into believin% they are court documents# 9 collector must not ma?e false or misleadin% representations about the amount> character> or le%al status of a debt# 9 collector must not threaten criminal action if a debt is not paid or en%a%e in conduct that is li?ely to lead a debtor to believe that criminal action could be a conseFuence of non( payment> if the alle%ed conduct does not amount to a criminal offence#

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9 collector must not threaten action 6le%al or otherwise7 that a collector is not le%ally permitted to ta?e or does not have the instructions or authority to ta?e> either at any time or at the time that the representation is made#

;.

Co!r*%o& Pr%&*%"l! 9 collector should not exercise unacceptable or ille%itimate pressure on a debtor or third party in order to persuade the recipient of the conduct to underta?e a particular course of action# E0a/"l! J

9 collector should not lead a debtor to believe that the collectorJs decision to report an alle%ed criminal offence will depend on whether or not a payment is made# 9 collector should not threaten to list a debtor on a blac?list or bad debts database or otherwise threaten to ta?e action which purports to affect a debtorJs credit ratin% or ability to obtain credit> u&l!++ such listin% is permitted under the credit reportin% provisions of the 5rivacy 9ct#

-0.

La&$ua$!> 4%ol!&*! a&( "#y+%*al 'or*! 9 collector should not use abusive> threatenin%> offensive> obscene> or discriminatory lan%ua%e to a debtor or a third party# 9 collector must not use> or threaten to use> violence or physical force to any person# 9 collector must not use> or threaten to use> violence or physical force to property#

6.#B# The %uidelines do not have le%al force and do not represent a definitive interpretation of the law which is the role of the courts# $owever> as an enforcement a%ency the 9CCC considers it useful to identify the type of conduct it considers may be at ris? contravenin% s# 3" of the Trade 5ractices 9ct 6andLor other le%islation7# To decide whether the le%islation has been breached the 9CCC approaches each matter on a case by case basis> ta?in% into account all relevant circumstances# Compliance with the %uideline is only one factor to be considered# This means that full compliance with the

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%uideline can help minimise the ris? of breachin% the law> but cannot provide businesses with a %uarantee a%ainst liti%ation#7

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