Key Points:

Debt collectors and credit agencies want the Government to reverse a law change which expunges information about people declared bankrupt after seven years.

Under the previous system, a record of someone being made bankrupt was permanently available to the public.

The change means that if someone has been bankrupted several times it will not show up in a search of the Ministry of Economic Development's register unless the bankruptcies happened within the past seven years.

Debt collectors say it amounts to a sanitising of the records.

The New Zealand Credit and Finance Institute, representing the debt collection and credit control industries, wants the previous permanent system reinstated.

National president David Young said some people had been bankrupted two or three times over an extended period, but a private credit check did not show this up because records were kept for only seven years.

The change was introduced with the Insolvency Act in 2006.

"Previously you could go in and go, 'hang on a minute, this guy's had a series of failures' and you could spot them," Mr Young said.

"It's those sort of people that we need the most protection from."

The institute is also annoyed that details under the new alternative to bankruptcy, the No Asset Procedure, will stay on the public register for only one year.

It is now coming up to a year since the procedure was introduced, meaning details of its first debtors are about to disappear from the record.

Mr Young said part of the issue was the new insolvency legislation's focus on rehabilitation. The flipside was that financial failure was no longer considered such a big deal.

"I've got no problems with them being more rehabilitative, but if we remove the stigma, then we remove one of the reasons people don't do it [declare bankruptcy]."

The manager of the ministry's insolvency and trustee service, Ross Van Der Schyff, said the keeping of personal insolvency records was brought into line with the 2004 Credit Reporting Privacy Code when the Insolvency Act came into force.

The Office of the Privacy Commissioner administers the code, and is reviewing it.

"If businesses or others have concerns about the way insolvency and credit-related information is available, we would welcome hearing about that during the public consultation period," commissioner Marie Shroff said.

John Roberts, country director of the credit reporting agency Veda Advantage, said bankruptcies vanishing from the public record was not necessarily a problem.

It was a small industry and habitual defaulters were known.

He said many people were bankrupted because of situations outside their control, such as illness or a marriage breakup, and needed a second chance.

But he believed No Asset Procedures should be treated in the same way as bankruptcies, and Veda would keep them on people's credit reports for seven years.

Veda advocates a move to positive credit reporting - in which people's complete credit histories, including details about income, the size of their mortgages, and credit card balances are shown in a credit report - to give potential creditors a better idea of how reliable a person is.

New Zealand is one of only four OECD countries to maintain a "negative" credit reporting system, under which only negative details such as loan defaults and bankruptcies are recorded on a person's credit file.