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Debt In New Zealand

Debt Collection Services

Debt collection services are services provided to a creditor by a debt collection company or an individual who is either contracted to, or paid by a debt collector for the return of funds to the creditor.

for a better definition of debt collection or debt collection service see the bottom of the page.

Debt Collection (or otherwise known as) Debt Recovery companies (or collection agencies) are companies that have had a credit file referred to them for collection.
This Collection process could be as simple as a time limited attempt to contact a Debtor to recover the debt or it may be a lengthy process involving registration at an external credit referencing agency.

Most Collection Companies Do not charge the cost of collection to the creditor, and most work on a no-win no-fee basis, meaning that if they dont collect they do not charge.

From the authors experience, many collection companies provide commissions for staff as incentives. This has lead to a number of collectors using tactics that would be considered less than ethical, even bordering on harrassment.
Some of the tactics, if used by a retail company would be considered a breach of the fair trading act, resulting cases relating to misleading and deceptive conduct. Wikipedia seems to have the best explanation around in relation to Debt Collection Companies however the legislation governing the practices of the companies in the US and NZ differs.

In the United states, legislation has been enacted to prevent the 'overzealous' acts perpetrated by collectors.
The Fair Debt Collection Practices Act aims to allow the consumer to avoid some of the deceptive conduct and the Harrassment, which in the USA had even lead to the Deaths of some Collectors / Reposession agents.

Some of the tactics used by debt collectors are as follows;

  • Not allowing a debtor to speak, when making demands.
  • Repeating the demands numerous times.
  • Not waiting for the debtor to finish taking before speaking themselves.
  • Talking over the debtor at the same time.
  • Advising unless a minimum amount is paid collection action will continue.*
  • Advising a debtor that legal action is inprogress when it is not.
  • Repeating legal threats.
  • Calling numerous times per day
  • 'spamming' a debtor with calls txts and e-mails.
  • Sending statements which are themselves a demand
  • Demanding documentation

(*) Note, continuing collection can and sometimes is any and/or all of the above.

Costs Of Debt Collection

Cost of not collecting

The Costs of not collecting the debt is loss to the Financial Institution, and their investors

Costs of collecting

The cost of collecting can be damage to the reputation of the creditor, leading to decreased confidence in the respective organisations.

In the time befor the internet, information was not that readily available, and information was mainly transferred by word of mouth, an old saying went something like this.. '..if you have a good experience you might tell one person.. and if you have a bad experience, you would tell ten...'

Now with the advent of the internet, the good bad ratio has changed, good 1 or 2 people might still know about it.. but get it wrong and using the internet not just one or two, but millions of people might get to know about it..

A prime example of this is a couple who had a poor experience with an American airline, and he posted it on the internet for the world to know.. see [here] or you could get on a list such as [here]

Reputation could be irreparibly damaged such as [Here]

Especially when you send letters such as this [here] to a 75 year old man, who is already struggling

Debt Collection Definition

Debt:Something, especially money, that is owed to someone else, or the state of owing something:(Cambridge Dictionary)

Collection:An amount of money collected from several people, or the act of collecting money: (Cambridge Dictionary)

Services:the particular skills that someone has and can offer to others:(Cambridge Dictionary)

Services:Anything which is not goods or money:GST Act 1985 NZ LEG