Debt collectors make a living recouping money and possessions from cash-strapped Kiwis who are struggling to make repayments.
But family emergencies, redundancy or the need for a new car can strike when you're financially unprepared, requiring a hasty hire purchase agreement or trip to the finance company. Their complicated contracts and high interest rates, however, can sometimes lead to mounting debt.
What are your rights if the repo man knocks at your door?
CHECK THE CONTRACT
The Ministry of Consumer Affairs advises that before you buy anything on credit check the contract's debt collection policy. Even if you are sure you can keep up repayments, it's worth checking what will happen if you can't.
The creditor (person or company you owe money to) may have included in the contract a right to repossess the goods if you stop paying.
WHAT IF I DISPUTE THE DEBT?
If you don't pay for goods or services, a creditor is likely to chase you to get the money back.
However, if you don't believe the debt is yours, Consumer Affairs says dispute it 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 that the debt is in dispute, Consumer NZ advises.
WHAT CAN THEY REPOSSESS?
Debt collectors often buy your debt from creditors or work on commission. But they can only repossess your goods or charge late fees as set out in your original contract. If you borrowed money or bought goods on credit for personal or household use, you are covered by the Credit Contracts and Consumer Finance Act. If you can't resolve the issue, take your case to the Disputes Tribunal.
The Citizens Advice Bureau says a company only has the right to repossess your property if it was included as security in the contract.
Many lending contracts are not specific about what counts as security, which is often interpreted as a licence to take whatever they want. But it is illegal for lenders to seek security over all of your property if the credit was for personal or household use.
WHAT ABOUT MY CREDIT HISTORY?
Any debts or missed payments will be recorded on your credit record. This is used by creditors to make decisions about lending you money and can affect your ability to secure finance.
Under the Privacy Act, you have the right to check your credit file free of charge and have your information recorded correctly.
If you are having trouble paying debts you can discuss your options with a budget adviser before the debt collectors come. In the worst-case scenario, if you have debts you cannot pay, you may be able to apply for a Summary Instalment Order (a formal arrangement between you and your creditor that allows you to pay back all, or an agreed part, of your debts over time), a No-Asset Procedure, or apply for bankruptcy.
Federation of Family Budgeting Services chief executive Raewyn Fox says everybody's circumstances are different. When somebody calls for help, the organisation looks carefully into their financial situation.
"We make sure that everything that's happening for this person is legal in terms of whatever original contract they signed and just make sure it is a legally collectible debt."
The organisation provides budgeting advice and negotiating services between the person in debt and the creditor. Budgeting advisers will develop a personalised plan and work out how much is available to offer the debt collectors.
By the time people contact budgeting advice services their financial problems are often "a long way down the track". But Ms Fox says it's never too late to start turning your situation around.
"It's a pretty stressful situation for people to be in, but it hasn't happened overnight. People have been in trouble, not making payments for quite a long while before it gets to the debt collection stage usually."
POSSIBLE LAW CHANGES
Earlier this year, the Law Commission recommended wide-ranging changes to current consumer credit repossession laws, in a bid to establish a fairer and more transparent regime for all parties.
Under the proposed changes, consumers entering into credit contracts would have to be told explicitly when repossession could occur, and which goods could be repossessed.
The Commission is also recommending that some goods, such as bedding, washing machines, portable heaters, passports and identity documents, should not be subject to repossession. If the recommendations are accepted, repossession agents would need to be licensed and could lose their licences for breaching the new laws.
Fox says the new rules will give more protection to people, with clearer contracts that are easier to understand.