Your platform's auction closed at 9pm on Sunday night. The winning bidder confirmed the win in the app within minutes, then went quiet. Payment is now two days overdue, the seller has emailed twice this morning asking what you're going to do about it, and the commission your platform was meant to earn on the $2,450 hammer price is sitting in limbo. You have a debtor. What you may not have is a process for turning that debtor back into a paying customer.
What one unpaid bid actually costs you
Your platform earns its revenue from a commission, buyer's premium or transaction fee on settled sales. When a winning bidder never pays, there is no settlement and therefore no fee, but the work and the platform overhead still happened. Beyond the lost revenue, an unpaid lot consumes your staff time, damages the seller's confidence in your marketplace, and can ripple into a dispute about who is responsible for chasing the money and whether the goods should be relisted.
The legal frame is simpler than it feels. When a bid is accepted, a contract is formed: the bidder agrees to pay the hammer price (and any premium your terms impose) and the seller agrees to hand over the lot. Your terms and conditions sit on top of that arrangement and set the payment date, the fees, and the consequences of default. The debt you are chasing is a contractual debt, and the ordinary law of contract, the Australian Consumer Law (ACL) and the conduct rules for debt collection all constrain how you can recover it. That last point matters more than most platform operators realise: how you chase a debt is regulated, not just whether you chase it.
A five-step recovery sequence
The steps below run in the order a real platform would take them. Steps one and two are things you can largely set up before the problem ever occurs; steps three to five are the escalation path once a bidder is actually in default.
Step 1: Confirm the debt before you chase anyone
Before you send a single reminder, be sure of the three things every recovery depends on: who owes you money, how much, and under what contract.
- Who the debtor is: Is the winning bidder an individual or a company? It changes everything downstream: companies can be served with a statutory demand, individuals can be made bankrupt, and the two routes have completely different thresholds and consequences.
- What is owed and when it fell due: Add up the hammer price, any buyer's premium, and any fees your terms allow, then confirm the due date has actually passed. Your terms should state that payment is due immediately or within a set number of days of the auction closing.
- That the contract exists: A bidder's obligation to pay comes from the contract formed by their bid and its acceptance, under the terms they accepted at registration. If your terms changed recently, confirm the version the bidder accepted is the version you are now enforcing.
- Your evidence: Pull the bid history, the settlement confirmation, the invoice and any messages with the bidder into one file now. If this ever reaches a court, the auction log and invoice are the documents you will be relying on, and they are far easier to assemble while the transaction is fresh.
There is also a time limit sitting behind all of this. An action on a simple contract debt must be brought within six years of the cause of action accruing (see, for example, s 14(1)(a) of the Limitation Act 1969 (NSW), with equivalent limits in every state). Six years sounds like a long time, but the clock starts when the debt falls due, and it does not pause while you negotiate.
One more thing to check at this stage: whether the bidder has a genuine dispute about the goods. A common reason bidders withhold payment is that the item arrived faulty or not as described. If that happens, the question of who owes what turns on the consumer guarantees in the ACL, and the common assumption that auction sales are exempt is narrower than most operators think. The guarantee exemptions in ss 54 to 57 of the ACL apply only where the supply does not occur by way of "sale by auction", which s 2 of the ACL defines as a sale conducted by an agent of the seller. On many online marketplaces the sale runs directly between seller and buyer with the platform merely facilitating, so the guarantees can still apply. Know which side of that line your platform sits on before you assume the buyer has no defence.
Step 2: Use the payment controls you already have
The cheapest debt recovery is the payment you never have to chase, which is why the strongest platforms build collection into the transaction itself.
- Card on file: Require every bidder to attach a payment method at registration, and make settlement against that card automatic where your terms authorise it. A platform that can charge the winning price the moment an auction closes rarely needs a debt recovery process at all.
- The CVV trap: You may collect the card verification code (CVV or CVC) at checkout to verify a card-not-present transaction, but you must not store it after authorisation. The Payment Card Industry Data Security Standard (PCI DSS) prohibits retaining card verification codes, even encrypted, once authorisation completes. Do not design your account setup to collect the CVV and keep it for later charging; collect the card details, verify, and discard the code.
- Direct debit constraints: If your platform settles by direct debit instead of card, the ePayments Code, the voluntary code most Australian banks and payment providers subscribe to, limits how and when a consumer's account can be debited without their authorisation. Make sure the authorisation is express and recorded.
- The suspension lever: A term that blocks a bidder from placing new bids while any balance is outstanding is the single most effective consequence most platforms have. It stops the loss compounding and gives the bidder a concrete reason to settle.
What you should not do is charge a stored card without a clear basis in your terms. An unauthorised charge invites a chargeback and can itself be characterised as misleading or deceptive conduct, which turns your debt problem into an ACL problem.
Step 3: Escalate on a documented schedule to a letter of demand
Once a bidder is actually in default, work a fixed escalation sequence. Automation matters here: a consistent, machine-generated process costs almost nothing and removes the temptation to let debts slide.
- Day zero: the invoice: Generate and send an itemised invoice the moment the auction closes, showing the amount, the due date and the payment methods.
- Days three to fourteen: reminders: Automated reminders through the app and by email at set intervals, each one stating the amount outstanding and what happens next. Keep the tone factual.
- Week two or three: the letter of demand: If the reminders fail, send a formal letter of demand. It should set out the amount owing and how it was calculated, a final deadline (seven to fourteen days is typical), the consequences of non-payment (fees, account suspension, credit reporting where available, and legal action), and the ways payment can be made. Send it by email and registered post, and keep both copies.
There are conduct rules around all of this. The debt collection guideline RG 96, issued jointly by ASIC and the ACCC in April 2021, applies to creditors collecting their own debts as well as to external collection agencies. It sets expectations about when and how often a debtor can be contacted and prohibits harassment and misleading representations. Treat it as the floor for your own communications, not as something that only applies if you outsource collection. A bidder who feels harassed by your automated texts can make that a consumer law complaint against your platform.
Most recoveries end at the letter of demand stage. For the debts that do not, the paper trail you built in steps one and three is what makes the next steps possible.
Step 4: Apply only the consequences your terms actually permit
This is the step where platforms most often damage their own position. The consequences you threaten in the letter of demand have to be consequences your terms genuinely allow and the law will enforce.
- Late fees and penalty interest: A contractual stipulation that imposes a payment on breach is unenforceable as a penalty if it is out of all proportion to the legitimate interests of the party seeking to enforce it (Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205). A default fee that is a genuine pre-estimate of your costs, or a reasonable commercial charge, will generally stand; a fee set at 20 per cent of the hammer price to punish the bidder will not. If you have not reviewed your fee levels against this test, do it before you rely on them.
- Unfair contract terms: Since the reforms to the ACL that took effect in late 2023, an unfair term in a standard form consumer or small business contract is not only void, proposing or relying on one is a contravention that can attract penalties of up to $100 million for a body corporate and $2.5 million for an individual (see s 23 and s 224 of the ACL in Schedule 2 of the Competition and Consumer Act 2010 (Cth)). A term is unfair if it causes a significant imbalance in the parties' rights, is not reasonably necessary to protect your legitimate interests, and would cause detriment to the bidder. Sweeping suspension powers, one-sided fee clauses and blanket exclusions are the terms regulators look at first.
- Account suspension and deactivation: These are fine as consequences, but only if your terms say you may do them, you have told bidders they exist, and you apply them consistently. Using suspension selectively against one bidder and not another invites a different kind of complaint.
- Credit reporting: If your platform extends credit and qualifies as a credit provider, a default can be listed with a credit reporting body only where the conditions in s 6Q of the Privacy Act 1988 (Cth) are met: the bidder is at least 60 days overdue, has received a written notice demanding payment, the amount is at least $150, and the debt is not statute-barred. If you do not fit the credit provider definition, threatening credit listing you cannot deliver is itself a misleading representation.
- Conduct boundaries: Do not threaten legal action you are not prepared to take, do not contact the bidder's employer or family, and do not keep pursuing a debt after the six-year limitation period has run. RG 96 is explicit that collecting statute-barred debts is unacceptable.
Step 5: Keep the court and insolvency routes ready
If the letter of demand fails and the debt is significant, the formal routes exist, but they are slower and more expensive than most operators expect. They should be priced and planned, not improvised.
- Court and tribunal claims: Small debts can be pursued in the civil and administrative tribunals or small claims divisions of the local courts, whose monetary limits vary by state and territory, with larger debts going to the local or district court. Expect filing fees, legal costs and a hearing date some months away, and remember that winning a judgment is only the first half: enforcing it against a bidder who still will not pay is a separate process with its own costs.
- Company bidders: the statutory demand: If the bidder is a company and the debt is due and payable and at least $4,000, you can serve a statutory demand under s 459E of the Corporations Act 2001 (Cth). The company then has 21 days to pay, secure or compound the debt, or apply to have the demand set aside. Failure to comply creates a presumption of insolvency that supports a winding-up application. This is a powerful and formal step: the demand must be in the prescribed form, verified by affidavit, and served correctly, and a genuine dispute or offsetting claim will defeat it. The Federal Court's Corporations Information Sheet 1 sets out the full procedure, and it is not something to serve without advice.
- Individual bidders: bankruptcy: For an individual, a creditor's petition can be presented where the debt is at least $5,000, the statutory minimum under s 5 of the Bankruptcy Act 1966 (Cth), and an act of bankruptcy has occurred within the preceding six months. In practice this usually follows judgment and a bankruptcy notice, and it is a step that changes the bidder's life, so it is reserved for debts that genuinely warrant it.
- The commercial question: For a debt of a few hundred dollars, court proceedings routinely cost more than the amount recovered. Before you file, weigh the debt against the filing fees, legal costs and staff time, and consider whether a payment plan, a settlement at a discount, or writing the debt off is the commercially rational answer. The point of the process is to recover money, not to be right.
When to bring the unpaid bid to a lawyer
You do not need a lawyer to send an invoice or a reminder, but there are points in this sequence where the cost of getting it wrong exceeds the cost of advice. Bring the matter to a lawyer early if the bidder is a company, if the amount is large enough that you would actually litigate, if the bidder is disputing the goods, or if you are unsure whether your terms authorise the consequences you have already imposed.
If you brought us the file, we would start by reviewing your terms and conditions against the current ACL, including the unfair contract terms regime and the penalty doctrine, so that every fee and suspension power you rely on is enforceable. We would confirm the debt, the limitation position and the right forum, then draft the letter of demand or statutory demand in the prescribed form, advise on what can and cannot be said in collection communications under RG 96, negotiate with the bidder or their representative, and, if it comes to it, run the proceedings for you. Most engagements end well before court: the value of a lawyer in this area is mostly in making sure the steps you take yourself do not destroy the claim.
The clause your recovery actually depends on
If you remember one thing tomorrow, make it this: the most-skipped step in platform debt recovery is checking that your own terms authorise the consequences you are imposing. Platforms routinely auto-charge cards, suspend accounts and add late fees on the strength of terms that were never reviewed against the penalty doctrine or the unfair contract terms regime, and the recovery collapses at exactly the moment it matters, because the bidder's first line of defence is always "your terms do not let you do that". A clause check now, before the next non-paying bidder appears, is cheaper than the alternative, which is discovering the problem in the middle of a dispute where the bidder has a lawyer.
The process in short: confirm the debt and the contract, capture payment up front so most debts never happen, escalate through invoice, reminders and a letter of demand, apply only the consequences your terms and the law permit, and keep the court and insolvency routes costed and ready for the debts that genuinely justify them. None of it is exotic. All of it depends on terms that were drafted to be enforced.