Even scarier than the debt collector is the repo man. But do not fear - there are laws to protect your rights.

Sometimes when you borrow money, the lender will require that the loan be "secured". This means that if you default on the loan, the lender can repossess and sell a specified item of yours to recover the debt. Secured loans include hire purchase deals (the security is the item you bought on HP) or personal loans secured by one of your possessions (such as your fridge or washing machine).

The lender may also insist that you have a "guarantor". This is someone who has agreed to repay the loan if you cannot.

If you stop repaying a loan and the guarantor does not take over the repayments, the lender can repossess the security and sell it to recover the debt. The repossession process is covered by the Credit (Repossession) Act 1997.

Under the Act, certain people cannot be repossession agents, including anyone convicted for an offence involving personal violence or dishonesty in the past 5 years.

Note: the Law Commission are reviewing the whole area of repossession.

Before repossession

Before repossession the following rules apply:

• A lender cannot take possession of the goods unless the borrower is in default.
• The lender must serve a pre-possession notice on the borrower and every guarantor, unless they have reasonable grounds to think the goods have been, or will be, damaged or removed.
• Every pre-possession notice must give the nature of the default and give the defaulter at least 15 days to remedy the problem.

Rights of entry

The following apply when goods are being repossessed:

• The lender cannot enter the property in an unreasonable manner. The Act does not define "unreasonable". Really it just means what is unreasonable, based on common sense, given the individual circumstances of each case.
• The lender cannot enter property outside the hours of 6 am to 9 pm Monday to Saturday, nor can they enter on Sundays or on a public holiday, unless the borrower consents to this in writing.
• The lender must give the defaulter a copy of the pre-possession notice.
• If agents are repossessing on behalf of the lender, the agents must give the defaulter a copy of their authority to act on the lender's behalf.
• If the occupier of the premises is not present during the repossession, the lender must leave a notice in a prominent place stating that the premises have been entered and listing what goods have been repossessed.

After repossession

After repossession:

• The lender must serve a post-possession order on the borrower and any guarantors within 21 days of repossession.
• The notice must state that, to get the goods back, the borrower must within 15 days reinstate the credit agreement (for example, by paying any outstanding money due), or settle the agreement by paying off the outstanding balance.
• The lender cannot sell the goods until the post-possession notice has expired.
• Borrowers can obtain an independent valuation of repossessed goods.

Selling the goods

When selling the goods, the lender:

• Can sell by auction, tender or private sale.
• Must ensure that the sale is commercially reasonable, including taking reasonabe steps to ensure the best price is obtained for the goods.
• Must give the borrower reasonable notice of any auction or tender, unless the goods are perishable or liable to drop in value quickly.
• Where goods are sold, must give the borrower a statement of account within 10 days after the sale showing the gross sale proceeds, the costs of the sale, and the balance owing to or from the borrower.

For more help

If you believe your lender has breached this Act, talk to them. If you remain dissatisfied:

• Banking Ombudsman If the lender is a bank, complain to the Banking Ombudsman: Freephone: 0800 805 950, P O Box 10-573, The Terrace, Wellington; Ph: (04) 471 0006; Fax: (04) 471 0548; help@bankombudsman.org.nz
• Insurance and Savings Ombudsman If the lender is an insurance company, complain to the Insurance and Savings Ombudsman: Freephone: 0800 888 202; P O Box 10-845, Wellington; iombudsman@clear.net.nz

Take a claim to a Disputes Tribunal or court.