Debt collection practices in the spotlight

Debt collection agencies have come under scrutiny in the recent  High Court decision of Security Systems Limited v Smart Controls Limited

The Court warned against the “improper” use of the statutory demand process when the debt is known to be subject to a genuine dispute.

The Court also warned against the “undesirable” practice of some debt collection agencies of including demand for collection costs without having proper contractual basis for them. The Court noted that the inclusion of terms on an invoice for the recovery of costs and default interest charges were ineffective as contractual terms because the invoice was issued after the contract had been formed.

The Court considered such practices were to be “discouraged, given the intimidatory effect of statutory demands.” The Court therefore awarded increased costs against Security Systems Limited.

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