27 August, 2015
Debt collection has long been associated with decep- tive and unscrupulous practices. In Thailand, it is not uncommon to hear stories of collectors tricking debtors into paying by giving false information, or even resorting to abusive language, violence, and blackmail.
In an effort to stamp out these practices, the legislature has passed the Debt Collection Act. The new law, which will become effective on September 2, 2015, seeks to establish fair and standardized debt collection rules. The law applies to all debt collectors, from institutional lenders such as banks, to individual creditors. Importantly, however, while the law applies to individual debtors, debtor-companies are not protected by the law.
Under the law, the way creditors collect debts will be more tightly regulated. Debtors will also have increased protection and rights.
performance, he or she must show his or her power of attor- ney to the debtor. If the debtor pays the debt, the collector must give the debtor evidence of payment, such as a receipt.
When debt collectors try to collect a debt, they cannot do the following:
- Threaten to use violence against the debtor or any action that injures the body, property, or reputation of the debtor. f Notify and disclose any debt of the debtor to third parties who are not related to the debt collection.
- Use profane or other language that insults the hearer or reader.
- Use false information to deceive a debtor (e.g., falsely claiming to have a court order, be a state official, be a lawyer, or falsely threatening to seize the debtor’s assets or salaries).
- In addition, and much like when contacting third parties, debt collectors cannot disclose that the nature of their communication to debtors is to collect a debt. Debt collectors cannot contact debtors by postcard, open letter, fax, or any other “non-discreet” method that shows the communication is related to collection. Moreover, even if the communication is discreet, the debt collector can only indicate the collector’s business name—as long as it does not indicate the business is a debt collector.
Debt collectors’ fees are also limited by the new law. A collector cannot collect any fees or expenses over an official limit set by the Committee Governing Debt Collection, a committee appointed under the Act. Also, the law defines “debt collector” as a a loan to a debtor. The debt can be legal or illegal. In other words, even loan sharks and other illegal money lenders are subject to the Debt Collection Act. Further, a creditor’s authorized repre- sentative (such as a creditor’s attorney), a debt collection business agency, and its authorized representative are all catego- rized as “debt collectors” under the Act. A “debt collection business” means any business hired to collect a debt, directly or indirectly. Lawyers who collect debts for clients are not considered a “debt collection business.”
A “debtor” means any natural person obligated to pay a debt. This includes creditor who makes a loan to a debtor. The debt can be legal or illegal. In other words, even loan sharks and other illegal money lenders are subject to the Debt Collection Act. Further, a creditor’s authorized repre- sentative (such as a creditor’s attorney), a debt collection business agency, and its authorized representative are all catego- rized as “debt collectors” under the Act. A “debt collection business” means any business hired to collect a debt, directly or indirectly. Lawyers who collect debts for clients are not considered a “debt collection business.”
A “debtor” means any natural person obligated to pay a debt. This includes an individual debt guarantor.
Under the law, debt collectors can with the debtor or another person authorized by the debtor (e.g., a debtor’s lawyer). A debt collector can only contact third parties to acquire information or learn the debtor’s location. The debt collector is also limited to identifying himself and inquiring on the debtor’s whereabouts to a third party. The collector cannot tell the third party that the debtor owes a debt, unless the third party is a spouse, parent, or child of the debtor.
The debt collector is also required to communicate confidentially with the third party. The collector cannot use any language, symbol, mark, or business name of the debt collector on any correspondence that might indicate the communication is related to debt collection.
The debt collector can only contact the debtor between 8 a.m. and 8 p.m. from Monday to Friday and between 8 a.m. and 6 p.m. on holidays. The debt collector can also only contact the debtor at a place indicated by the debtor.
Attorneys for debt collectors must say their names, agency, creditor’s names, and state the debt amount. If the debt collector seeks to collect the debt in person, or demands performance, he or she must show his or her power of attor- ney to the debtor. If the debtor pays the debt, the collector must give the debtor evidence of payment, such as a receipt.
When debt collectors try to collect a debt, they cannot do the following:
- Threaten to use violence against the debtor or any action that injures the body, property, or reputation of the debtor. f Notify and disclose any debt of the debtor to third parties who are not related to the debt collection.
- Use profane or other language that insults the hearer or reader.
- Use false information to deceive a debtor (e.g., falsely claiming to have a court order, be a state official, be a lawyer, or falsely threatening to seize the debtor’s assets or salaries).
In addition, and much like when contacting third parties, debt collectors cannot disclose that the nature of their communication to debtors is to collect a debt. Debt collectors cannot contact debtors by postcard, open letter, fax, or any other “non-discreet” method that shows the communication is related to collection. Moreover, even if the communication is discreet, the debt collector can only indicate the collector’s business name—as long as it does not indicate the business is a debt collector.
The collector cannot convince a debtor to pay by check if individual directors, managers, and representatives of corporate debt collectors can be criminally liable. If a juristic person, such as a company, violates the law, and the offense falls within the scope of duty of the director, manager, or representative, these indi- viduals can also be punished for the same offense as the offense committed by that juristic person.
Debt collectors’ fees are also limited by the new law. A collector cannot collect any fees or expenses over an official limit set by the Committee Governing Debt Collection, a committee appointed under the Act. Also the collector cannot convince a debtor to pay by check if the collector knows the debtor cannot afford the debt.
Failure to comply with the law is a criminal offence. Anyone who is aware of a violation of the law can make a report to a district office or police station. The punish- ment can be imprisonment and/or a substantial fine. For example, a debt collector who threatens or causes injury to a debtor’s person, property, or reputation can be punished with imprisonment of up to five years and/or a fine of up to THB 500,000.
Furthermore, individual directors, managers, and repre- sentatives of corporate debt collectors can be criminally liable. If a juristic person, such as a company, violates the law, and the offense falls within the scope of duty of the director, manager, or representative, these individuals can also be punished for the same offense as the offense committed by that juristic person.
The new law is expected to reduce unethical, unfair, and illegal debt collection practices. While the best way for debtors to minimize the risk of dealing with unscrupulous debt collectors is to borrow from reputable lenders, the Debt Collection Act provides a measure of protection for those who do not have this option. Prudent lenders should under- stand the Act to comply with the law.
For further information, please contact:
Alongkorn Tongmee, Tilleke & Gibbins
