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disputes

Credit defaults: How long do they stay on your credit record?

Key Takeaway

Credit defaults generally remain on a credit record for up to five years from the date of the default. Individuals can dispute inaccurate information directly with credit reporting agencies. The Disputes Tribunal can resolve underlying debt disagreements, which may then facilitate correction of credit record information, but it does not directly manage the duration of defaults on a credit record.

Duration of Credit Defaults on a Credit Record

In New Zealand, a credit default occurs when an individual fails to meet their financial obligations, such as making a payment by the due date. This information may be reported to a credit reporting agency, which then includes it in an individual's credit report.

Credit reporting agencies are permitted to retain information relating to a default for a specified period. Information relating to a default, where the payment is 30 days or more overdue, may be held on a credit report for up to five years from the date the default occurred [Source: Credit Reporting Act 1999, s 10(1)(g)]. This timeframe applies regardless of whether the debt has since been repaid.

Other types of information may also be held for different durations:

  • Information about serious credit infringements (such as an intent to defraud a credit provider or avoiding repayment) may be held for seven years [Source: Credit Reporting Act 1999, s 10(1)(i)].
  • Overdue payment information (less than 30 days overdue) is not generally considered a 'default' for this purpose but can be part of an individual's repayment history information [Source: Credit Reporting Act 1999, s 10(1)(ga)].

Accessing and Disputing Credit Information

Individuals have a right to access personal information held about them by credit reporting agencies [Source: Privacy Act 2020, s 44(a)]. If an individual believes that information held on their credit report is inaccurate, incomplete, or misleading, they have the right to request its correction [Source: Privacy Act 2020, s 47(1)]. The credit reporting agency must take reasonable steps to correct the information or, if they refuse, note the individual's request for correction [Source: Privacy Act 2020, s 48].

Resolving Underlying Debt Disputes via the Disputes Tribunal

While the duration of a credit default on a credit record is governed by the Credit Reporting Act 1999, the underlying debt that led to the default can be disputed. The Disputes Tribunal is an informal court that resolves disputes up to a certain monetary limit.

Jurisdiction and Purpose

The Disputes Tribunal has jurisdiction to hear and determine claims for monetary payment, work to be done, or goods to be returned, where the amount claimed is up to $30,000 [Source: Disputes Tribunals Act 1988, s 10(1)(a)]. This limit can be extended to $50,000 if both parties agree in writing [Source: Disputes Tribunals Act 1988, s 10(1)(b)]. It provides an accessible and informal way to resolve disputes, including those concerning debts that may have led to a credit default.

The Application Process

To initiate a claim, an applicant must lodge a claim form with the Disputes Tribunal. The form outlines the details of the dispute and the desired outcome [Source: Disputes Tribunals Act 1988, s 28(1)]. The tribunal then notifies the other party (the respondent) of the claim [Source: Disputes Tribunals Act 1988, s 28(2)].

Costs of a Claim

Application fees for the Disputes Tribunal are generally low, designed to ensure accessibility. The specific fee amount is set by regulations [Source: Disputes Tribunals Act 1988, s 56].

What to Expect at a Hearing

Disputes Tribunal hearings are typically informal and are presided over by a referee [Source: Disputes Tribunals Act 1988, s 18(1)]. Parties represent themselves, as legal representation is generally not permitted unless all parties and the referee agree [Source: Disputes Tribunals Act 1988, s 40(1)]. The referee aims to help parties reach an agreed settlement through mediation [Source: Disputes Tribunals Act 1988, s 34(1)]. If an agreement is not reached, the referee will make a binding decision [Source: Disputes Tribunals Act 1988, s 50]. The tribunal's proceedings are held in private [Source: Disputes Tribunals Act 1988, s 33(1)].

Impact of a Disputes Tribunal Decision on a Credit Record

A decision from the Disputes Tribunal that rules on the validity or amount of a debt does not directly alter a credit record. However, if the Tribunal finds that a debt is not owed, or that a different amount is owed, this decision can be used as evidence to request a correction to inaccurate credit information with the relevant credit reporting agency and the entity that supplied the information [Source: Privacy Act 2020, s 47]. The credit reporting agency has an obligation to take reasonable steps to ensure the accuracy of the information they hold [Source: Credit Reporting Act 1999, s 11(a)].

When to Seek Independent Legal Advice

Individuals who require specific guidance on their legal rights concerning credit defaults, debt disputes, or who need assistance with complex legal processes should seek independent legal advice. Information on legal assistance is available from Community Law Centres which provide free legal advice and services, or from a private lawyer.

Key Resources