Debt collectors

We explain your rights and obligations under the law.

11oct debt collectors hero

Hearing from the debt collector can be a frightening experience for some. Here are your rights and obligations as a debtor.

Debtors' rights

I don't believe I owe this money. What should I do?
Dispute the debt immediately, in writing. Of course, you should have a valid reason for doing so. You may have already paid, or perhaps you are not the person who owes the money, or the amount of the debt is wrong.

If you don't believe you owe money, dispute the debt immediately, in writing.

Set out your reasons clearly, and provide evidence if possible, or your objections may be treated as delaying tactics. If the debt collectors call, explain clearly and rationally that the debt is in dispute. Keep your cool: debt collectors aren't easily swayed by threats.

Most debt collectors keep records of their phone calls so take careful note of the date and time of calls and who is speaking. You'll need your own records if there is an argument later over who said what.

If you can't resolve matters, take your case to a Disputes Tribunal.

I've told the debt collectors I dispute the debt, so how come a retailer has just turned me down for credit?
If you discover you have been listed with a credit reference agency over a disputed debt, phone immediately asking them either to remove your name or to place a "flag" next to your name stating the debt is in dispute. Follow up in writing.

If I don't pay, can the debt collectors take my possessions?
If you get behind on your payments under a secured loan entered into on or after 1 July 1998, or on any hire purchase agreement (regardless of when you signed up), the item you bought on hire purchase or listed as security for the loan may be repossessed.

But the repossession agent can only take these goods, not anything else.

Do I have to pay collection fees?
Only if you knew about them when you bought (or ordered) the goods or services. Traders can warn you about collection costs by clearly displaying notices about them, printing notices on credit application forms, or getting you to endorse your cheque so you agree to be liable for collection costs if it bounces.

If a debt collection company demands collection costs and the trader did not tell you about those costs at the time you requested the goods or services, both the trader and the debt collectors have breached the Fair Trading Act. The only exception is if the trader has explicitly directed the debt collectors not to demand these costs.

Do I have to pay late fees and interest on an overdue account?
Only if you agreed to do so before you entered the contract. If the creditor takes you to court and wins, the court might order you to pay interest and collection costs. But the creditor can't mislead you by suggesting this will happen automatically.

Who do I pay?
If you agree you owe money, don't assume you should pay the creditor directly. They may have sold the debt outright, which would mean you now owe the debt collector not the creditor. Debt collection letters include instructions on who to pay.

Debt collectors

Can private individuals hire debt collectors to collect money for them?
Yes, but some debt collectors prefer to work for large businesses. Shop around to find someone who is prepared to do it for a reasonable price. You can only go to a Disputes Tribunal to enforce debts if the other party disputes they owe the money.

Do most debt collectors work on commission?
Arrangements vary but a combination of upfront fee plus commission on actual collections (as high as 30 percent of the total debt) is common. Debt collectors sometimes buy old or unpromising debts outright in a process called "debt factoring".

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The Consumer Advice Line is available to all our members for support on any consumer-related issue. Our expert advisers can explain your rights and help you resolve problems with a retailer.

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Paul U.
10 Apr 2020
Bravo Disputes Tribunal

The experienced Disputes Tribunal adjudicator at the Hastings court house identified the real issues and she quickly saw through attempted obfuscation. The system works.

cindy d.
18 Mar 2021
baycorp made mistake at my credit check

when I applied home loan last year! financial broker told me I have debt owe baycorp $385.8 whole collection fee is $12720

accutally is 2019 july 26 bay corp tried to contact with me about my debt to other company $12720 !according to txt . i paid $15803 on 8th Aug 2019 to baycorp accounr!I thought i had pay in full about this debt! I
Didn’t know I still owe bay Corp $385 ! Later I had another txt message shown I still owe $385 so I paid imedently on 8 oct 2019 !

The problem is bay Corp didn’t update my payment $385 In my credit check system
It finally Influence my whole home loan application. And made a big loss of my investment chance last year !

I request them to remove my credit check record ‘ it definitely ruined my business cause my bank didn’t give me loan last year

Can help me at this stage ‘ I
Am struggle about this issue for my months I can’t sleep well about it. ! Anybody can help me