Debt collection

If your business collects debts from consumers it is important that you understand and comply with consumer laws.

Your obligations

The Fair Trading Act 1986 makes it unlawful to make false or misleading representations when you collect debts. For example, you must not tell debtors (or imply) that:

• you have done something you have not – for example, that you have filed court proceedings in relation to the debt when you have not
• you are going to do something you do not intend to do – for example, that you will file court proceedings when you have no intention of doing so
• you are working for government agencies or the courts if you are not – for example, debt collection documents should not mimic court or other official notices or orders.

You must not harass or coerce someone into repaying a debt. It may be harassment and/or coercion to:

• misrepresent your intentions about how you will deal with the debt
• threaten or intimidate debtors into paying the debt
• make unreasonably frequent attempts to contact the debtor, their family and friends, or make contact in a way that might cause embarrassment to the debtor
• contact the debtor at unsociable times of the day or at a time they have specifically asked you not to
• continue to demand payment from a borrower in circumstances where you know they have no ability to pay.

Additional obligations if the loan relates to a consumer credit contract

A consumer credit contract is a contract where a consumer borrows money or defers payment for goods or services and where credit fees and/or interest are or may be charged, and/or a security interest is or may be taken.

If you are collecting a debt arising from an unpaid loan under a consumer credit contract, either because you are the lender or you are collecting the debt owing to the lender, you have additional obligations under the Credit Contracts and Consumer Finance Act 2003.