What you need to know about repossession of your possessions under a credit contract, and your rights in the repossession process when you have defaulted on payments.

You have legal rights before repossession

If you are struggling to meet finance payments for consumer products 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. Credit contracts include personal loans, credit sales, bank overdrafts, revolving credit sales and mortgages.

Your legal rights with repossession depend on when you entered into a credit contract. For credit contracts entered into on or after 6 June 2015, or existing contracts that are varied after that date, special rules for repossessing consumer products are set out in the Credit Contracts and Consumer Finance Act (CCCFA). These rules do not apply to commercial products.

See also :

Know your rights

Lenders may only repossess products if they are individually identified, item by item, as subject to a security interest in the credit contract.

A security interest in products or property allows lenders to secure repayment of the credit contract by selling the products or property and using the proceeds to repay the loan.

Even then, lenders can’t repossess certain necessary consumer items such as beds, bedding, cooking equipment (stoves), medical equipment, heaters, washing machines and fridges. The exception is when such products are the subject of a purchase money security interest (PMSI), where the money was borrowed to buy those particular items, such as a bed or a stove.

So a lender can’t repossess unspecified consumer items in an ‘all present and after acquired property’ security clause (APAAP). This type of clause tries to secure all present property of the borrower and any products acquired after the credit contract was entered into. Changes to the consumer credit laws for credit contracts entered into on or after 6 June 2015 make it more difficult for lenders to use this type of clause.

A lender can repossess products you purchased after you entered a credit contract only when you:

  • specifically agreed to add those products as security after you bought them
  • sold the original secured items and bought other things with the money (or with the money you borrowed from the lender)
  • 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
  • have listed items in a purchase money security interest.

Read Secured loans to find out more.

Repossessions have to be specifically authorised under the credit contract.

When lenders can repossess

Lenders can only repossess when:

  • your credit contract expressly gives them the right to repossess and/or to enter premises for the purposes of repossession
  • you have failed to make payments or you have breached the credit contract in some way
  • the products are at risk (based on reasonable grounds to believe the items will be destroyed, damaged or removed)
  • they are registered as a financial service provider.

When lenders can’t repossess

Lenders can’t repossess property if they have not decided:

  • your written complaint about enforcing the credit contract
  • your hardship application.

Read Loan repayment issues and hardship applications to find out more.

Your rights during repossession

Under the new repossession rules in the Credit Contracts and Consumer Finance Act (CCCFA), lenders must comply with:

In particular, this means that lenders must:

  • treat you and your property reasonably and in an ethical manner during any repossession process. This includes not damaging your property when removing items, providing safe and adequate storage, and being reasonable about exercising their right to enter
  • exercise the care, diligence and skill of a responsible lender.

Lenders can’t opt out of any parts of the CCCFA within the loan contract so that the repossession rules don’t apply.

Repossession process

If you have not made repayments that are due, or you have breached the contract in another way, lenders must make sure that the items to be repossessed are correctly identified in the security interest.

They must also follow these steps:

Repossession warning notice in writing

The lender must give you 15 days advance written notice (from when you receive it) to pay your money. This notice must have the following key information:

  • your full name and contact details, and the lender’s details
  • the nature of the breach
  • how it must be fixed, and
  • that the lender will repossess otherwise.

The lender may act without issuing a written notice if they believe the items are at risk. You may challenge this if you think there are no reasonable grounds for that belief.

You can also voluntarily hand over the secured goods if you don’t wish to pay. This ends the credit contract.

Repossessing your items

If you don’t pay, only licensed repossession agents can do repossessions and only between 6am and 9pm Monday to Saturday, but not on Sundays or public holidays. If you are at home, they must give you a copy of:

  • the repossession warning notice
  • the credit contract
  • their authority to act (if they are an agent)
  • the repossession agent’s licence or their 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 all amounts due, including the costs of repossession, that ends the removal.

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.

If no one is home and the credit contract authorises them to enter, they can take the items. They must do as little damage as possible, not leave your house obviously open, and leave a notice stating their entry, the items taken, and leaving copies of the documents above.

Written post-repossession notice

If you do nothing, the lender must give this notice to you within 14 days (or 18 days if posted). This informs you of your options. At any time before sale, you can:

  • pay the arrears and any reasonable repossession costs and carry on
  • settle the contract in full by paying off the balance and any outstanding obligations
  • find a buyer for the items at the current values set out in the notice, or someone to take over the contract.

Selling the products

If you do nothing, after 15 days the lender can sell the products. If they don’t wait, they can only recover any advance already loaned to you but not accrued, fees, charges or interest. Sales must be commercially reasonable and done by auction, public tender or private sale. If the lender does not hold a sale within 30 days, you may require a sale by auction.

After the sale

Within 7 days after the sale, the lender must give you a written statement of account with 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.

When things go wrong

You have different options if:

  • you are 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 and did not comply with the Lender Responsibility principles
  • you were given incomplete or inaccurate information before or during the contract.

Contact the finance company

Contact the finance company as soon as possible to vary or cancel the contract if any of these situations apply. Under a hardship application they can agree to:

  • reduce the amount you pay by spreading payments over a longer period
  • let you take a payment holiday until a future date when you can start paying again.

See also:

Next steps

If you are unable to resolve your issue directly with the bank, our Resolve It tool has information to help you take the next steps. These may include going to the Disputes Tribunal or District Court.

Resolve it: Banking, finance and insurance

Need more help?

Contact us for more guidance.

If you are in financial difficulty, the Insolvency and Trustee Service(external link) and Federation of Family Budgeting Services(external link) may also be able to help.

Common situations

Items that are attached to the secured item

Jenny bought a car 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.

Credit contract did not specify each item

John buys a few items of household furniture on finance from a finance company. 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 on default by John as they did not specify each item individually.

Damage to your home

A repossession agent breaks into Sally’s home while she is 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, and, if it is not resolved satisfactorily, to the Dispute Resolution Scheme that the lender belongs to.