Debt recovery and enforcement
Overview of restrictions on repossession
There are a number of significant restrictions on lenders taking possession (called “repossession”) of hire-purchase goods or goods listed as security under a loan contract:
- Goods can only be repossessed if the contract explicitly allows this (see below, “When lenders can repossess”).
- When repossessing, the lender must comply with the lender responsibility principles in the CCCF Act (see below, “Lender responsibility principles for repossession”).
- The repossession must also comply with the detailed procedural requirements in the CCCF Act (see below “The repossession process”).
When lenders can repossess
When does a lender have a right to repossess property from me?
Goods can only be repossessed from you if your credit contract explicitly allows this. The repossession rules in the CCCF Act don’t give a lender any repossession rights they wouldn’t otherwise have – the Act just says how the lender can use any repossession rights that are in the contract.
When the credit contract does allow repossession, the lender can repossess goods only if:
- you “default” – which means you fail to make your payments or you breach the contract in some other way, or
- the goods are “at risk” – which means the lender has reasonable grounds to believe the goods have been (or will be) destroyed, damaged or removed.
A lender also can’t repossess property from you if:
- they’re not registered as a financial service provider (all lenders must be registered), or
- you’ve made a written complaint about some action the lender has taken to enforce the credit contract and the complaint hasn’t been resolved yet, or
- you’ve made a hardship application that the lender hasn’t yet decided about (see “Unforeseen hardship” in this chapter).
Your property can also be repossessed if you provided it as security to guarantee someone else’s loan and the borrower hasn’t been doing everything their loan contract requires (see “Guarantors” in this chapter).
(For information about hire purchase (“credit sales”) and about security for loans and other credit, see “Credit contract: Hire purchases, loans and other credit” in this chapter.)
Note: There are certain types of consumer goods – stoves and fridges for example – that usually can’t be used as security for a loan and that therefore can’t be repossessed if you miss your payments (see “What is a secured loan?” in this chapter). However, that restriction doesn’t apply when one of those items is bought on hire purchase and the security is part of the HP arrangement, or if a bank or other lender loans you money specifically so you can buy the item (those types of securities are called “purchase money security interests”).
Lender responsibility principles for repossession
Reasonable and ethical treatment
During any repossession process, the lender must treat you and your property reasonably and ethically (including property that you don’t own but that’s in your possession, like hire-purchase goods). They must take all reasonable steps to make sure that nothing is damaged, that repossessed items are adequately stored and protected, and that they (the lender) doesn’t enter your home in an unreasonable way.
Lenders also have a general duty, whenever they’re dealing with you, to exercise the care, diligence and skill of a responsible lender.
The repossession process
The Credit Contracts and Consumer Finance Act describes the process that the lender and repossession agents must follow when taking property from you. There are specific rules dealing with what has to happen before, during and after the repossession.
Before the repossession: Requirement for warning notice
Before they can repossess goods from you on the grounds that you’ve defaulted under your contract, the lender must send you (and any guarantor) a repossession warning notice at least 15 days before they repossess. (These used to be called “pre-possession notices”.)
The warning notice must include a range of information, including what the default is (that is, how much you’re behind in your payments, or in what other way you’re breaching the contract). If the default can be put right – for example, by getting your payments up to date – the notice must set a time limit for you to do this. That time must be at least 15 days after you receive the notice. After that time, the lender can repossess the goods.
The warning notice must be hand-delivered to you, or left at or mailed to your home or work or another address you’ve given the lender for this purpose. The notice can’t simply be emailed to you. The notice can be sent to your last-known address, if you’ve moved and haven’t told the lender your new address.
Repossession warning notices don’t stay valid indefinitely. They expire after 60 days, so if the lender hasn’t repossessed within that time, they’ll need to send you another warning notice giving you at least another 15 days before they can repossess.
If you’ve received a warning notice, you have the option of voluntarily delivering the goods to the lender to the place specified in the notice.
Note: The lender doesn’t have to send you a warning notice before repossessing goods if they have reasonable grounds to believe that the goods are “at risk” – that is, if they believe that the goods have been or will be destroyed, damaged or removed.
When the goods are repossessed
If you don’t pay what is owing or otherwise remedy the breach of the credit contract, within the time specified in the repossession warning notice (which must be at least 15 days), the goods can be repossessed. However, the lender or their agent can only enter your property to take the goods if this is allowed under the credit contract or if you allow them to enter.
The repossession must be carried out in a reasonable way, and the lender (and their agents) must comply with the following specific requirements:
- Only licensed repossession agents can carry out repossession – To be able to repossess goods, repossession agents must be licensed under the Private Security Personnel and Private Investigators Act 2010, and their employees or contractors must hold certificates of approval issued under that Act. A lender can’t authorise a repossession agent or employee to repossess unless the agent or employee is licensed or approved. Lenders also can’t repossess goods personally unless they themselves are licensed repossession agents or approved repossession employees. If they’re not, they must use licensed or approved individuals. (If it’s a vehicle being repossessed, licensed tow-truck operators can also be used.)
- Repossession can only happen at certain times – The repossession can only be carried out between 6 am and 9 pm, Monday to Saturday, and not on public holidays (unless, after you defaulted but before the repossession, you agreed in writing to it happening outside those allowed times).
- If you’re home at the time – If you or anyone else is home at the time, the lender or their agent must produce the following documents:
- a copy of the repossession warning notice
- a copy of the credit contract
- if it’s an agent, evidence of their authority to repossess the goods on the lender’s behalf
- a copy of their repossession agent’s licence or their certificate of approval to be a repossession employee (or, if it’s a tow-truck operator repossessing a vehicle, they’ll have to meet the identification requirements that apply to them: see “Legal requirements for tow-truck operators” in the chapter “Driving and traffic law”)
- a statement that the premises have been entered, the date of entry and a list of goods to be taken, and
- a statement of your rights after repossession and your right to complain about the conduct of the person doing the repossessing.
If you pay what’s owing on the spot, you can stop the goods being taken away. However, you’ll also have to pay the reasonable costs of the repossession.
- If no-one’s home – If no-one’s at home at the time, and your credit contract allows the lender or repossession agent to enter, they can enter and take the goods. However, they must leave a notice, in a prominent place, stating that the premises have been entered and listing the goods taken, and they must also leave copies of the other documents listed above (see “If you’re home at the time” above). If it’s a tow-truck operator repossessing a vehicle, then they must also leave a copy of their licence in a prominent place, along with the notice and those other documents. The person repossessing must make sure they don’t leave your place obviously open when they leave.
- Lender can’t hold car keys etc – The lender (or their repossession agency) can’t hold keys or other access devices for consumer goods that are named as security under a credit contract (for example, car keys), unless you voluntarily gave the keys or the device to the lender or agent after you received a repossession warning notice.
Repossessing things attached to other items – There are specific rules that apply to repossessing goods (called “accessions”) that are installed in or attached to other consumer goods – for example, a car stereo or a replacement car engine. In these cases, the lender or agent must remove the accession in a way that causes the least amount of damage to the item it’s attached to (for example, your car) and the least inconvenience to you as the owner of the other item.
After repossession: Requirement for post-repossession notice
Within 14 days after the repossession, the lender must send you and any guarantor a second notice, called a “post-repossession notice”, that gives you 15 days to do one of the following things:
- “Reinstate” the contract, by bringing your payments up to date, paying other costs like repossession and storage costs, and putting right any other breaches. This puts you back on the same footing as before you fell behind in your payments or otherwise defaulted. The goods must then be returned to you, and you can carry on making your usual payments.
- “Settle” the contract, by completely paying off everything owed under the contract and other costs such as the repossession and storage costs. The goods must then be returned to you. You’re now the owner of the goods, and the credit contract is over.
- Find a buyer. You can find someone to buy the goods at the lender’s “estimated value”, which must be set out in the notice.
Note: A budget advisor may be able to help you decide which of those three options is best (see “Other resources” at the end of this chapter).
If you don’t take any action within the 15 days, the lender must offer the goods for sale. The lender can’t sell, or offer to sell, the goods before the 15 days are up.
You can reinstate or settle the agreement at any time before the lender sells, or agrees to sell, the goods.
If the lender doesn’t give you a post-repossession notice after repossessing, they can’t sell the goods or exercise any of their other rights in relation to the goods, and they also have to bear their repossession costs.
What are my rights when the goods are sold?
If the lender sells the goods, they must take reasonable care to obtain the best price that’s reasonably obtainable at the time. All other aspects of the sale, including the method, time and place, must also be commercially reasonable.
The lender must give you and any guarantor reasonable notice before the proposed sale. If the sale is to be by auction or tender, then you, the lender and any guarantor are all entitled to bid or submit tenders.
You can force the lender to put the goods up for auction if the goods haven’t been sold within 30 working days after being repossessed.
Within seven days after selling the goods, the lender must give you and any guarantor a “statement of account” that tells you:
- how much the goods sold for
- the lender’s costs in selling the goods
- the amount you needed to pay at the time of the sale to settle the contract
- whether there’s money left over from the sale that the lender must pay to you, or whether you still owe money to the lender.
If you still owe money to the lender, you’ll have to negotiate with them about how this will be paid. The lender can’t claim anything other than what’s left owing after the sale – that means they can’t claim any ongoing interest or costs.
What action can be taken against lenders who breach the repossession rules?
If the repossession process isn’t followed properly, you can take the lender to the Disputes Tribunal or to the courts. They can make a range of orders against the lender, including:
- ordering them to pay you compensation for property damage, for financial loss, or for stress, humiliation or inconvenience, or
- ordering changes to the terms of the credit contract.
Even if you haven’t been caused any loss or damage, the lender or their repossession agent may have to pay you up to $6,000 in “statutory damages” for breaching the repossession rules.