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Published on September 13, 2007

Responding to complaints from many harassed debtors, an ad hoc National Legislative Assembly (NLA) committee is drawing up a set of guidelines to ensure creditors and collectors treat debtors fairly and respect their privacy in the course of pursuing repayment. The NLA will be putting together what it calls appropriate debt-collection practices to be submitted to the Finance Ministry and the Bank of Thailand, which are expected to issue clear-cut rules that recognise debt collection as a legitimate and necessary business activity and also guarantee consumers their rights to privacy and freedom from undue harassment. Any forthcoming regulations must be aimed at striking a delicate balance, protecting both creditors and debtors in as equitable a fashion as possible.

After all, debtors voluntarily entered into agreements with their creditors and therefore are legally bound to pay or repay the amounts specified in the contracts they signed. Creditors have the indisputable right to take reasonable measures to secure payments when they become due. But then "reasonable measures" can mean different things to different creditors and the debt collectors they employ. In most cases, courteous but insistent phone calls to a customer's office or home to remind them of their obligations and the possible consequences if the debt is not paid is enough to persuade a debtor, who is a few months behind, to pay up.

It is worth noting that debt collection involving credit cards and personal loans is the most problematic because the amounts owed are usually not significant enough to warrant court proceedings. That's why many creditors hire professional debt-collection companies to try to secure partial or full payment.

There are also some debtors who have neither the ability nor the inclination to honour their legal obligations despite reasonable steps being taken by creditors and debt collectors to try to get them to pay up or negotiate repayment plans. In these cases, some unkind, unconscionable debt collectors, who get paid a certain percentage of the amount recovered, deem it necessary to resort to nasty tactics.

According to news reports, extreme and downright indecent debt-collection practices include abusive phone calls to the homes and offices of debtors and messages being left with a third party, such as a work colleague or a family member, demanding the debt repayment with the aim of embarrassing the concerned party.

In one extreme example, which was widely publicised, a debt collector went into a school and informed the teacher and possibly other students that the parent of a particular student owed his creditor a lot of money. Dirty tactics such as these can never be justified regardless of the behaviour of debtors.

Obviously when financial authorities sit down to consider the proposal from the NLA committee, there will be plenty of examples offered as to how other countries deal with similar problems. For example, the US Federal Trade Commission and the Australian Competition and Consumer Commission have developed and put in place well-thought out guidelines on fair debt-collection practices.

In addition, financial authorities should also seek inputs from creditors, including banks and financial institutions and debt-collection companies, and get them involved in enforcing proper standards now, as well as ensuring that they conform to the new rules on fair debt-collection practices once they are enacted into law.

Training on fair debt-collection practices must be made mandatory for the personnel of debt-collection companies. Preferably, debt collectors must be required to complete training to qualify for their jobs. A new body will have to be created to screen and handle complaints regarding debt-collection practices deemed inappropriate or in violation of debtors' privacy. That is not to say fraudulent debtors, who seek to escape their obligations and take liberties with other people's money, should be protected from the usual discomfort and embarrassment that comes with being hounded by creditors and debt collectors, as long as the tactics being employed are lawful and decent. Credit-card issuers and banks on the other hand should do a better job of screening the credit ratings and financial standing of their prospective customers to minimise non-performing loans and thereby avoid the costly and time-consuming process of debt collection.