The Mortgage Supply Company

Dealing with debt collectors


Dealing with debt collectors

Debt collection agencies sound scarier than they are – with a bit of information you can be more confident about clearing your debt.

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Know your rights when you're in debt

If you don’t pay your bills, you face a visit from debt collectors – usually specialist companies who buy debt at a reduced rate and then claim it from you at full price, plus extra costs.

While the best way to avoid debt collection costs is to pay your bills on time, it also pays to know what debt collectors can and can’t do.


  • Debt collectors can’t say that legal processes have been started against you if they haven’t.
  • They can’t say that any legal outcomes are inevitable – for instance they can’t tell you that if you don’t pay now you’ll have to go to court where you’ll pay thousands in extra costs, because the court decides costs and it’s not inevitable that you’ll pay.
  • And most importantly – debt collectors can’t charge extra late fees or collection costs if you weren’t made aware of those potential costs when you incurred the debt. The way you’ll be made aware depends on the business – it could be a prominent notice in a shop or doctor’s office, or it could be included in a contract you sign. But if you weren’t made aware of the possibility of debt collection costs, you can’t be charged them. And you can’t be misled by the collector into thinking you will have to pay fees – for instance being told that payment by a certain date will avoid late fees when you would never have to pay fees at all.

This is important because the costs incurred on debt that has been passed to a collection agency can be pretty steep – they can charge an admin fee, a commission of around 30% of what you owe, and GST on top of your original debt.

If you are late with a payment, be careful to check who you actually have to pay – it may not be who you originally owed money to.

When you get a letter from a debt collector, call them soon, don’t just hope it will go away. The collectors are often willing to negotiate payment in instalments, and you can haggle the interest rate.

But if you are being chased for a debt you don’t owe – either because you paid it already or you never incurred the debt in the first place – make sure to contact both the original creditor and the debt collector in writing to dispute the debt. You’ll usually need to provide evidence of payment or identity, but it’s important to ensure a defaulted debt doesn’t get put down on your credit record because it may affect your ability to get a loan.

If you are being chased up for a debt that is more than six years old, ensure that you don’t admit the debt in writing or make any payments. You can’t be taken to court for debts more than six years old, but the clock resets if you admit you owe money or pay anything.

Should you find yourself facing debt collectors or struggling to manage debt collection payments, it’s important to act early. Get in touch and we can help you sort out your debts, by helping you find a loan to ease the pressure, or helping you manage your cashflow better.

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