Know your rights
If you fail to make payments owing, you have an overdue debt and a lender will take steps to recover their money. A lender might:
- use a debt collection agency to recover the debt
- sell the debt to the debt collection agency who becomes the creditor
- take you to court to recover the debt plus costs incurred or use other enforcement methods available through the courts
- repossess products you bought on credit (formerly called hire purchase) or listed as security under a loan contract (secured loans).
You still have rights even if you can’t pay your debts. Get advice early to deal with the debt.
Contact any creditors you owe money to early to try to sort out a payment plan before matters get out of hand. You may be able to change to your loan under the Credit Contracts and Consumer Finance Act.
If you dispute the debt, you should tell the lender or debt collection agency quickly and give your reasons why not.
A lender has six years to seek debt recovery. If you acknowledge the debt or you make a part-payment, the six-year period starts from the date of the acknowledgement or the date of the last part-payment, whichever is the later.
Read Loan repayment issues and hardship to find out more.
Your credit history
Credit reporting agencies collect and sell information about your credit history. They don’t need your consent to disclose reports to debt collectors and creditors involved in court proceedings against you or to certain government agencies. It’s important to check your credit record is accurate. You can ask for a free copy any time. If it isn’t correct, apply in writing to the credit reporting agency to have the information corrected. There are three credit reporting agencies in New Zealand.
Read Your credit record to find out more.
A debt collection agency will send or present you with a notice asking for the debt to be paid. They may also advise you that you can negotiate an agreed method of payment and that if you don’t pay, you’ll get a bad credit rating and they will take court action.
Read Debt collection to find out more.
Debt recovery through the Disputes Tribunal or the District Court
A creditor or debt collection agency can make a claim to recover the debt:
- in the Disputes Tribunal if the debt is less than $15,000 (or $20,000 if both parties agree)
- in the Tenancy Tribunal if the debt is related to tenancy issues
- in the District Court if the debt is $200,000 or less
- in the High Court for any amount, but usually over $200,000.
If a creditor makes a claim to the District Court for a disputed debt under $15,000, you can ask the court to transfer this claim to the Disputes Tribunal.
In the District Court, after a claim has been filed, you may dispute the debt and file a statement of defence. If you don’t settle the claim during the case management process, it will go to trial before a judge. The debt collection process for people making and responding to claims in the Disputes Tribunal or District Court is straightforward. The judge might issue an order of payment for the debtor to pay the lender with a date for payment and terms of payment, eg by instalments.
Read Civil debt(external link) on the Ministry of Justice’s website to find out more.
Only products secured under a consumer credit contract or specifically listed as security under a loan contract may be repossessed and your credit contract expressly allows for this. You must also be in default, which means you’ve failed to make payments or you’ve breached the credit contract in some way or the products are at risk (the lender has reasonable grounds to believe the items will be destroyed, damaged or removed).
Read Repossession to find out more.