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disputes

Debt collection agencies: What are they legally allowed to do?

Key Takeaway

Debt collection agencies in New Zealand pursue outstanding debts on behalf of creditors. Their activities are regulated by laws like the Fair Trading Act and Privacy Act. Disputes can often be resolved through the Disputes Tribunal, an informal forum for claims up to certain monetary limits, with a focus on resolving issues by negotiation or binding orders.

Debt Collection Agencies and Dispute Resolution in New Zealand

Debt collection agencies are businesses that recover outstanding debts for creditors, which are individuals or entities owed money [Source: Fair Trading Act 1986, s 2]. These agencies operate under various legal frameworks in New Zealand, which dictate their permissible actions and responsibilities, as well as providing avenues for consumers to resolve disputes.

What Debt Collection Agencies Are Legally Allowed to Do

Debt collection agencies are generally permitted to contact debtors to request payment of outstanding debts. However, their conduct is subject to legal restrictions:

  • Fair Trading Act 1986: This Act prohibits misleading or deceptive conduct, false representations, and unsubstantiated representations in trade [Source: Fair Trading Act 1986, s 9, s 13, s 14]. This means debt collectors cannot falsely claim to be lawyers, threaten legal action they cannot take, or misrepresent the amount owed. It also prohibits harassment and coercion [Source: Fair Trading Act 1986, s 19(a)].
  • Privacy Act 2020: Debt collection agencies must comply with the information privacy principles outlined in this Act when collecting, holding, using, and disclosing personal information [Source: Privacy Act 2020, s 23, Principle 1, Principle 3, Principle 6]. This means they must only collect necessary information, store it securely, and disclose it only when permitted by law.
  • Contact Methods: Agencies may contact debtors via phone, mail, email, or in person. However, excessive or unreasonable contact, or contact at inappropriate times, may constitute harassment [Source: Fair Trading Act 1986, s 19(a)].
  • Legal Action: If a debt remains unpaid and undisputed, debt collection agencies, acting on behalf of the creditor, may initiate legal proceedings to recover the debt through the courts or a Disputes Tribunal, which is a low-cost, informal forum for resolving civil disputes [Source: Disputes Tribunals Act 1988, s 4].

Dispute Resolution Process via Disputes Tribunal

The Disputes Tribunal is a judicial body designed to resolve minor civil disputes informally, quickly, and affordably, without the need for lawyers [Source: Disputes Tribunals Act 1988, s 4, s 38].

What is a Disputes Tribunal?

A Disputes Tribunal is an independent judicial body that hears and determines disputes between parties. Decisions are made by a Referee, who is an independent decision-maker appointed to hear cases in a Disputes Tribunal [Source: Disputes Tribunals Act 1988, s 4, s 5].

Jurisdiction

The Disputes Tribunal has specific jurisdiction, which defines the types of cases it can hear and the monetary limits it can award:

  • Types of Claims: The Tribunal can hear claims relating to contracts, consumer issues, property damage, and services [Source: Disputes Tribunals Act 1988, s 10(1)]. This includes disputes over the existence or amount of a debt.
  • Monetary Limits: A Disputes Tribunal can hear claims up to $30,000. This limit can be extended to $50,000 if both parties agree in writing [Source: Disputes Tribunals Act 1988, s 13(1), s 13(2)]. If a claim exceeds these limits, it must be heard in a higher court, such as the District Court.
  • Exclusions: Certain matters are excluded from the Tribunal's jurisdiction, such as claims involving land titles, employment agreements, or disputes about wills [Source: Disputes Tribunals Act 1988, s 11].

Application Process

To initiate a claim, an applicant (the person bringing the claim) must complete an application form and pay the prescribed fee. The application must clearly state the nature of the dispute and the outcome sought [Source: Disputes Tribunals Act 1988, s 27(1)]. The Tribunal then notifies the other party, who is known as the respondent, of the claim [Source: Disputes Tribunals Act 1988, s 30].

The Hearing

Disputes Tribunal hearings are designed to be informal. Parties represent themselves, and lawyers are generally not permitted to appear [Source: Disputes Tribunals Act 1988, s 38(1)]. The Referee's role is to help parties reach an agreement by conciliation, a process where an impartial third party helps disputing parties communicate and explore options for resolution [Source: Disputes Tribunals Act 1988, s 41]. If an agreement is not reached, the Referee will make a binding decision [Source: Disputes Tribunals Act 1988, s 44].

Outcomes

After a hearing, the Tribunal can make various orders, including:

  • An order for payment of money [Source: Disputes Tribunals Act 1988, s 18(1)(a)].
  • An order for goods or services to be supplied or performed [Source: Disputes Tribunals Act 1988, s 18(1)(b)].
  • An order for goods to be returned [Source: Disputes Tribunals Act 1988, s 18(1)(c)].
  • An order for work to be done to remedy a defect [Source: Disputes Tribunals Act 1988, s 18(1)(d)].
  • An order declaring that a party is not liable to another party [Source: Disputes Tribunals Act 1988, s 18(1)(e)].

Orders made by a Disputes Tribunal are legally binding [Source: Disputes Tribunals Act 1988, s 44(1)].

Enforcement of Orders

If a party fails to comply with a Tribunal order, the order can be filed in a District Court and enforced as if it were a judgment of that court [Source: Disputes Tribunals Act 1988, s 53(1)]. This means that standard debt enforcement procedures, such as attachment orders or warrants to seize property, can be used.

Costs Associated with the Disputes Tribunal

The costs involved in taking a claim to the Disputes Tribunal are generally low. An application fee is payable when lodging a claim [Source: Disputes Tribunals Act 1988, s 27(1), Schedule 1]. The fees are set out in regulations and can change, but they are significantly less than initiating proceedings in other courts. Parties are generally responsible for their own costs, as lawyers are not involved, and the Tribunal does not typically award costs to cover a party's time or expenses [Source: Disputes Tribunals Act 1988, s 41(2)].

What to Expect When Dealing with Debt Collection Agencies and the Disputes Tribunal

When contacted by a debt collection agency, it is important for individuals to:

  • Verify the Debt: Request proof of the debt from the agency, including the original creditor, the amount owed, and details of how the debt arose.
  • Keep Records: Maintain detailed records of all communications with the agency, including dates, times, names of individuals spoken to, and summaries of conversations.
  • Communicate Clearly: If disputing the debt, clearly communicate this to the agency in writing.

If a dispute proceeds to the Disputes Tribunal:

  • Preparation: Parties should gather all relevant documents, such as contracts, invoices, payment records, and correspondence.
  • Informal Setting: The hearing environment is designed to be less formal than a court. The Referee will guide the discussion and encourage a resolution.
  • Opportunity to Present Case: Both parties will have an opportunity to present their side of the story and respond to the other party's arguments.

When to Seek Independent Legal Advice

For complex debt issues, disputes involving significant sums exceeding the Disputes Tribunal's jurisdiction, or questions about specific legal rights and obligations regarding debt collection or court proceedings, it is advisable to seek independent legal advice. Information can also be sought from Community Law Centres for free legal guidance and assistance: https://communitylaw.org.nz/.

Key Resources