If you have an overdue debt and fail to make payments on it, your belongings could get repossessed. Find out about the process and what your rights are.
If you have a credit contract and your payments are overdue, the lender will take steps to recover their money. They might repossess products you:
- bought on credit (formerly called hire purchase or HP)
- listed as security under a loan contract (secured loans), eg a personal loan, bank overdraft or mortgage.
Before you buy
Before you buy products or services on credit or take out a personal loan, find out what will happen if you can't pay. Unexpected life events such as an accident, illness or losing your job could mean you don't have as much money as you expected. You can compare different companies' debt policies and choose the one that is best for you.
Lenders repossess items so they can repay your credit contract by selling the products or property they repossess and using the proceeds to repay your loan.
If you are struggling to meet payments for products you have bought on credit, you have certain rights before the products are repossessed. You also have rights if you have provided items as security for a loan under a credit contract.
When items can be repossessed
There are special rules for repossession in the Credit Contracts and Consumer Finance Act (CCCFA). The rules don’t apply to commercial products. They only apply to consumer products bought for personal use.
Lenders can repossess items from you when:
- your credit contract gives them the right to repossess an item, and to enter your premises to make the repossession, and
- you have defaulted, according to the terms of the credit contract or breached the credit contract in some other way or the lender has reasonable grounds to believe the items will be destroyed, damaged or removed, and
- the lender is registered as a financial service provider.
What can be repossessed
A lender can only repossess items after you entered a credit contract when:
- you have specifically agreed to add those products as security
- you have sold the original secured items and bought other things with the money (or with the money you borrowed from the lender)
- you bought products that have been installed in or fixed to products which are listed as security. The lender must cause the least amount of damage or inconvenience to you when they remove these
- items are subject to a purchase money security interest (PMSI), which means that money was borrowed to buy those particular items and the creditor has registered their financing statement within 10 working days of your possession of the items.
Lenders can’t repossess certain necessary consumer items like beds, bedding, cooking equipment (stoves), medical equipment, heaters, washing machines and fridges, unless they are individually identified, item by item, as being a security interest in your credit contract, or the items are subject to a PMSI.
If they try to repossess other items that aren’t specified in the contract, that is illegal and you should report them to the Commerce Commission.
What lenders must do
Lenders must treat you and your property reasonably and in an ethical manner. This includes:
- not damaging your property when removing items
- providing safe and adequate storage
- being reasonable about using their right to enter your home.
If a lender doesn't follow the correct procedure for repossession, they could be acting illegally and you can report them to the Commerce Commission.
Make a complaint to the Commerce Commission(external link) — Commerce Commission
Lenders can’t repossess items from you without following the correct process.
Getting a repossession warning notice in writing
The lender must give you 15 days advance written notice (from when you receive it) to pay them the money you owe. This notice must include:
- your full name and contact details
- the lender’s details
- the date of the credit contract
- enough detail to identify the goods
- details about how you breached your credit contract with them
- how the issue must be fixed
- notice that the lender will repossess the items if the issue isn’t fixed.
The lender may act without issuing a written notice if they believe the items are at risk of being destroyed, damaged or removed. You can challenge this, eg seek damages or an injunction, if you don't believe they followed the correct repossession procedure or had reasonable grounds to act.
You can also voluntarily hand over the secured goods if you don’t wish to pay. This terminates the credit contract, and the post-possession rules then take effect.
Collecting your items
Only licensed repossession agents can do repossessions, and only between 6am and 9pm Monday to Saturday. They can’t repossess anything on Sundays or public holidays, unless they have written consent from the debtor. If they arrive outside these times without your consent, you can refuse to let them into your home and ask them to leave. If they refuse to leave, you should call the Police.
They must give you a copy of:
- the repossession warning notice
- the credit contract
- their authority to act on the lender’s behalf (if they are a repossession agent)
- their repossession agent’s licence or certificate of approval (as an employee)
- a statement of their entry, the date, and the list of possessions to be taken
- a statement of your rights after repossession, and your right to complain about the conduct of the repossession agent.
If you pay the agent the money you owe, including the cost of repossession, they won’t take the items. Make sure you get a receipt if you do this.
If no one is home and the credit contract authorises them to enter, they can enter your house and take the items. They must:
- do as little damage as possible
- not leave your house obviously open
- leave a notice stating that they entered your house, and noting the items they took
- leave copies of the documents listed above.
After your items are repossessed
The lender cannot just sell your belongings. They must give you a post-possession order within 14 days (or 18 days if they send a letter by post).
The post-possession order should say you have 15 days to either:
- pay the arrears and any reasonable repossession costs, then carry on with your credit contract
- settle the contract by paying off all the money you owe
- sell the items at the current values set out in the notice
- find someone to take over paying the contract.
If you can pay the money you owe, you'll get your items back and/or the contract will continue. You can get an independent valuation of repossessed goods.
Selling your repossessed items
If you can't pay or find a buyer within 15 days, the lender can sell the items.
They can only recover money already loaned to you, but not any accrued fees, charges or interest. If they sell the items for more than what you owed, you should be refunded the extra. Sales must be commercially reasonable and done by auction, public tender or private sale. If the lender doesn’t hold a sale within 30 days, you can require a sale by auction.
After the sale
Within 7 days of the sale, the lender must give you a written statement showing the sale proceeds, any sale costs, any outstanding amounts and the balance owing. No further interest, fees or collection costs can be added at this point.
If they sell the items for less than what you owe, you'll still have to pay the lender the balance, but they can't add any further interest or fees.
If things go wrong
Contact your lender or finance company as soon as possible to vary or cancel your contract if:
- you’re struggling with your loan repayments
- a term of the loan contract is too harsh, or you think the lender acted unfairly with the repossession process
- you were given incomplete or inaccurate information before or during the contract.
Your lender should belong to one of the four financial market schemes if they are registered under the Financial Services Providers Register.
FSPR(external link) — Companies Office
Apply for hardship
If you find it difficult to make repayments, you can make a hardship application to ask the lender to change your repayment arrangements. If they accept your application, they could agree to:
- reduce the amount you pay by spreading the payments over a longer period
- let you take a payment holiday until a future date when you can start paying again.
You can make a hardship application at any time, unless you:
- have been in default for 2 months or more
- have been in default for 2 weeks or more after receiving a repossession warning notice or Property Law Act notice
- have failed to make 4 or more consecutive debt repayments on their due dates.
You can only make one hardship application on the same grounds within any 4 month period, unless the lender agrees to consider another application. If you catch up on the debt repayments and defaults, you are entitled to make a hardship application again.
Ask about voluntary repossession
You can ask the lender to take their products back and cancel your credit sales contract. This is known as voluntary repossession.
If they agree, the products will be sold. You will still owe the lender any amount that is unpaid under the contract after the sale, but if you deliver the goods yourself, that can save you hefty repossession fees.
The lender can’t charge you for the costs of repossession, unless you ask them to collect the products. They can charge you for any costs they incur after repossession, like preparing the items for resale. These costs must be set out in a notice after the products are repossessed and again after the sale. If you cancel your credit sale contract through voluntary repossession, the lender has to follow the rules of repossession.
Loan repayment issues and hardship applications
If you can't agree a solution directly with your lender, our Resolve a problem tool has information to help you take the next steps. This may include going to the Disputes Tribunal or District Court.
If you think the lender didn’t act appropriately during the repossession process, you can make a complaint about them to their Financial Dispute Resolution Scheme. Every financial service provider must belong to one.
Banking, finance and insurance — Resolve a problem
Example — Attached to secured item
Jenny buys an alarm system for her car, which was listed as security under a loan. If Jenny gets behind in her loan payments, the creditor can repossess the car (which includes the alarm system), because the alarm system is installed in the car and forms part of the security.
Example — Credit contract did not specify each item
Hoani buys a few items of household furniture on finance. The finance company does not list all the items individually on the credit contract as required, but only states "dining room table and chairs, lounge suite etc". The finance company can’t rely on the credit contract to repossess all the items if Hoani defaults on his loan as they didn’t specify each item individually. If they repossess items not listed in the contract, Hoani can report them to the Commerce Commission, and may be able to get help from Community Law.
Example — Damage to your home
A repossession agent breaks into Sally’s home while she’s out shopping on a weekday at 10am. He damages the front door and can’t lock up. When she returns home, Sally is horrified to see the door is broken and open. On advice, she makes a complaint to the Commerce Commission about the repossession. She can also complain to the lender to get compensation. If it is not resolved satisfactorily, she can go through the Dispute Resolution Scheme that the lender belongs to.
Example — Repossessed because of previous owner's debt
Sione buys a car second-hand off a website. He checks the car out in person before finalising the purchase, but doesn't do a check on the Personal Property Securities Register to make sure there's no money owing on it. A few months later, the car is repossessed by the company who sold it to the previous owner, who owed money on it and had not been making payments.