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disputes

How to remove an unfair default from your credit report

Key Takeaway

Removing an unfair default from a New Zealand credit report involves disputing the underlying debt through avenues like the Disputes Tribunal, or challenging the credit report's accuracy via the Privacy Commissioner. The Disputes Tribunal can rule on debt validity, while the Privacy Commissioner addresses breaches of privacy principles related to credit reporting.

Removing an Unfair Default from Your Credit Report in New Zealand

A credit default is an entry on a credit report indicating that an individual has failed to meet their financial obligations, such as making a payment on a loan or bill by its due date [Source: Credit Reporting Privacy Code 2020, Schedule, Part 1, Interpretation]. An 'unfair' default typically refers to one where the underlying debt is disputed, incorrect, or reported in a way that breaches privacy principles. Removing such a default often involves a two-pronged approach: addressing the validity of the underlying debt and challenging the accuracy of the credit report entry itself.

Initial Steps: Contacting the Creditor and Credit Reporting Agency

Before formal dispute resolution, individuals should first contact the creditor (the person or organisation to whom the debt is owed) directly to understand the basis of the default and attempt to resolve the issue. If the matter cannot be resolved with the creditor, the individual may then contact the credit reporting agency (an organisation that collects and holds credit information) to dispute the accuracy of the information on their credit file. Individuals have a right to request correction of their personal information, including credit information, if they believe it is inaccurate [Source: Privacy Act 2020, Principle 7; Credit Reporting Privacy Code 2020, Clause 7]. The credit reporting agency must take reasonable steps to correct the information or, if unable to agree, attach a statement of correction requested by the individual [Source: Credit Reporting Privacy Code 2020, Clause 8].

Disputing the Underlying Debt through the Disputes Tribunal

If the dispute is about the validity of the debt that led to the default, the Disputes Tribunal is an avenue for resolving such matters. The Disputes Tribunal is a judicial body that provides an informal and inexpensive way to resolve civil disputes [Source: Disputes Tribunals Act 1988, s 17].

Jurisdiction and Scope

The Disputes Tribunal can hear claims for money owed, damages, return of goods, or the performance of services [Source: Disputes Tribunals Act 1988, s 11]. This means if the 'unfair default' stems from a belief that the debt itself is not owed, or that a contract was breached by the other party, the Tribunal can consider the matter. The Tribunal can hear claims up to $30,000, or up to $50,000 if all parties agree [Source: Disputes Tribunals Act 1988, s 10].

The Process at the Disputes Tribunal

  1. Application: An application is made to the Tribunal, requiring a fee [Source: Disputes Tribunals Act 1988, s 41]. The application should clearly outline the nature of the dispute and the desired outcome.
  2. Mediation/Hearing: The Tribunal's process is designed to be informal and without legal jargon. It aims to achieve an agreed settlement between the parties [Source: Disputes Tribunals Act 1988, s 17(c)]. A Referee, who is a legally qualified officer of the court, presides over the hearing [Source: Disputes Tribunals Act 1988, s 3]. Legal representation is generally not permitted, allowing parties to present their own case directly [Source: Disputes Tribunals Act 1988, s 42]. The Referee will hear evidence from both sides and may conduct inquiries [Source: Disputes Tribunals Act 1988, s 18, s 19].
  3. Decision: The Referee makes a decision that is legally binding on the parties involved [Source: Disputes Tribunals Act 1988, s 43]. If the Tribunal finds that the debt is not owed, or the contract giving rise to the debt is unenforceable, this decision effectively removes the legal basis for the default. While the Tribunal cannot directly order a credit reporting agency to remove a default, its decision can compel the creditor to amend their records, which then requires them to ensure the accuracy of information reported to credit agencies.

Costs

The costs for lodging a claim with the Disputes Tribunal are relatively low, consisting of a filing fee [Source: Disputes Tribunals Act 1988, s 41]. Parties are generally responsible for their own costs beyond this fee, as legal representation is usually not allowed [Source: Disputes Tribunals Act 1988, s 42].

What to Expect

Expect an informal process focused on reaching a fair resolution. The Referee will guide the discussion, seeking to understand the facts and the positions of both parties. Decisions are based on what is fair and reasonable, considering the law [Source: Disputes Tribunals Act 1988, s 18(3)].

Disputing the Credit Reporting Itself via the Privacy Commissioner

If the issue is not primarily about the validity of the debt but rather how it has been reported, or if the creditor fails to act on a Disputes Tribunal decision, the Privacy Commissioner may be the appropriate body. The Commissioner's role is to promote and protect individual privacy in New Zealand [Source: Privacy Act 2020, s 12].

Privacy Act 2020 and Credit Reporting Privacy Code 2020

The Privacy Act 2020 sets out principles for how personal information, including credit information, must be handled. Specifically, Principle 8 states that an agency holding personal information must ensure that the information is accurate, up to date, complete, and not misleading when used [Source: Privacy Act 2020, Principle 8]. The Credit Reporting Privacy Code 2020 provides specific rules for credit reporting agencies and credit providers regarding the collection, use, and disclosure of credit information [Source: Credit Reporting Privacy Code 2020, Clause 2]. It reinforces the right to request correction of inaccurate credit information [Source: Credit Reporting Privacy Code 2020, Clause 7].

Role of the Privacy Commissioner

If an individual believes their privacy has been breached because inaccurate or misleading information has been reported on their credit file, or if a credit reporting agency or creditor has failed to comply with their obligations under the Privacy Act or Credit Reporting Privacy Code, they can make a complaint to the Privacy Commissioner [Source: Privacy Act 2020, s 107]. The Commissioner's office can investigate complaints and, if a breach is found, may engage in mediation, make recommendations, or refer the matter to the Human Rights Review Tribunal for a binding decision [Source: Privacy Act 2020, Part 6].

Combined Approach

In some cases, a combined approach may be necessary. An individual might first use the Disputes Tribunal to resolve the underlying debt dispute. If the Tribunal rules in their favour, and the creditor then fails to update the credit reporting agencies, a complaint to the Privacy Commissioner regarding the inaccurate credit reporting would be the next step.

When to Seek Independent Legal Advice

Seeking independent legal advice is recommended for individuals facing complex debt disputes, significant financial implications, or when navigating the interaction between the Disputes Tribunal and privacy law. Information about the process and free legal guidance can be obtained from Community Law Centres (https://communitylaw.org.nz/) across New Zealand or by consulting a qualified legal professional. Citizens Advice Bureau can also provide general guidance.

Key Resources