Debt collection agency breached privacy principle over father's dispute with childcare centre

Referring a disputed debt to a reporting agency made it difficult for a father to negotiate a mortgage. Photo / Getty Images

A debt collection agency breached a privacy principle when it referred a father's debt with a childcare centre to a credit reporting agency without acknowledging it was disputed, the Privacy Commissioner has found.

The father had withdrawn his two young children from the centre because he had concerns for their safety while in the centre's care.

The centre then advised the man he owed a month's worth of fees for each child because he had signed a contract agreeing to give a month's notice before withdrawing his children.

The father disputed having to pay the fees because he said he had no choice but to remove his children from the unsafe environment.

The centre contacted the agency, Law Debt Collection Ltd, which in turn wrote to the man requesting he pay the fees by a set date.

The father immediately rang and left a message with Law Debt saying he disputed the debt and would be out of the country for a month. He also sent them an email.

Law Debt told the Privacy Commissioner it never received the phone message, but replied to the email asking on what basis he was disputing the debt and why he had waited to advise he would dispute it.

The man replied to Law Debt saying it had only made one attempt to contact him and he had responded in a timely manner. He also asked for more details about the nature of the debt.

Law Debt then posted the man four letters demanding payment and advising him it would refer the debt to a credit reporting agency - even though it was aware he was overseas.

The man wrote to the agency and childcare centre explaining in detail why he was disputing the debt. Law Debt said it didn't receive his email until some weeks after it first contacted him.

The man also sent information showing he had made a claim against the childcare centre in the Disputes Tribunal.

But at this point, Law Debt had already referred the matter to a credit reporting agency, telling them the debt wasn't disputed.

The credit record left the man unable to renegotiate his mortgage rates with his bank. The matter also caused him stress and anxiety, and he had to take several days off work as he had trouble sleeping.

In a decision released by the Officer of the Privacy Commissioner yesterday, it found Law Debt had breached the Privacy Act as it was "misleading" for them to inform the credit reporting agency the debt wasn't disputed.

The Disputes Tribunal eventually ruled in the man's favour, ordering the centre to write off the debt.

The matter was referred to the Director of Human Rights Proceedings.