Understanding NZ’s debt collection regulations

As a business or individual, understanding the right and wrong ways to approach debt collection is a crucial first step when you need to approach late payers.

To help, we’ve put together a brief layperson’s overview to New Zealand’s rules and regulations in this area. For anything more in-depth, we recommend you contact a professional debt collection agency, like Guardian Credit Services, who will be able to keep you on the right side of the law when it comes to debt recovery.


Honesty is golden

In all business dealings, honesty is the best approach, and the same is true during the process of debt collection, as there are real legal ramifications if you aren’t.

The Fair Trading Act 1986 makes it unlawful to make false or misleading representations when you collect debts. This essentially means that you can’t directly tell or imply to debtors that you are going to do something you don’t intend to do, or that you’ve done something you haven’t. This includes telling them that you have filed court proceedings when you haven’t, or that you are going to file court proceedings when you have no intention of doing so.

Another thing you are legally prohibited from doing is representing that you are working for a government agency or a court. Hopefully that didn’t need stating, but we wanted to be clear!


Harassment and coercion is a no-no, no-go

New Zealand law takes a hard view on harassment and coercion. In relation to debt repayments, you cannot threaten or intimidate debtors into paying a debt or misrepresent your intentions about how you are going to deal with the debt.

There are also rules around contacting a debtor that you may not be aware of. Contacting the debtor at unsociable times of the day or at times they’ve asked you not to, is considered harassment. Unreasonably frequent attempts to contact them or making contact in a way to cause them embarrassment is also off the cards, as is continually harassing them if you know they don’t have the ability to pay.

As a business, your cash flow depends on getting paid. One way to speed up the payment process while ensuring that you are operating within the lines of the law is to pass the collection of your debts onto a debt collector or debt collection agency.


Debt collection agencies are also subject to regulations

A debt collection agency will either buy your debt, making them the new creditor or collect your debt and pass the payment to you. Guardian Credit Services operates under the second system. It works on your behalf to encourage your debtors to pay you the amount they owe you, through proven (and legal!) methods.

Once they start work to recover debt on your behalf, debt collection agencies like Guardian Credit Services are also subject to rules and regulations, similar to those that apply to you if you were trying to recover the debt yourself.

Debt collectors should only contact the debtor when they need to, and for a reasonable reason. This includes requesting payment, creating or reviewing a repayment plan or asking why an agreed repayment plan hasn’t been followed. They contact your clients by phone, post or email, not in person, unless the debtor has agreed to in-person visits.

Misleading and coercive behaviour by debt collection agencies is not condoned in the eyes of the law. Physical force or pressure, and entering homes by force is against the law. Deception behaviour and threatening court action is not allowed, and taking advantage of any vulnerability or disability is unlawful.


Legalese around fees

When it comes to fees, any fees the debt collection charges can be passed onto your late paying clients – if it says so in the contract. This fee must be passed on at the correct cost, without adding any fees onto it. This is regulated and monitored by the Commerce Commission.


Enforcement action

If all the efforts of your debt collection agency fail, you have the option to ask the court to help you collect your debt. Fees are charged per debtor for this service, which is called civil enforcement.

As with anything to do with the courts, it pays to know the process, costs and time taken. Guardian Credit Services can help you with this final step, as they are experts in this field and have the processes and systems in place to save you time and ensure that you’re getting the best possible chance to recover your debt before needing to escalate it into the court system.

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