OPINION: The Government has introduced an information-sharing initiative to encourage people with overdue fines and reparation to pay what they owe.
This enforcement mechanism, the Credit Check of Fines, enables a credit report subscriber (for example, Veda Advantage - formerly Baycorp) to carry out a credit check for you. Situations where a credit check is useful include when your customer is applying for credit, or you are recruiting people for a job where they will be dealing with money or financial matters.
If you owe overdue fines or reparation (outstanding for more than 28 days and not the subject of a payment arrangement), then the total amount of your overdue fines and reparations can be reported if you apply for credit or a job handling money.
The information in the report will not show why you owe money or the event which gave rise to the fine or order of reparation. However, you may be declined credit or it may affect your employment opportunities.
If a credit check shows you have fines or reparation owing, then you should contact the Ministry of Justice (0800 4 FINES) for more information about what you owe and come to an arrangement to pay.
The Credit Check of Fines initiative also includes the implementation of a Super Priority which has the potential to give the court priority over secured property. For example, if property is seized and sold by the court to enforce payment of overdue fines and reparation, the court may get priority for the proceeds of sale over the secured party. Even if the secured party has registered their interest on the Personal Property and Securities Register (PPSR), the court will still have priority.
What this means is that if you do not check whether or not someone owes outstanding fines or reparation, and then you lend funds or advance credit which you then secure on the PPSR, the court may still trump that security and take the proceeds of sale from any secured item ahead of you.
If you're extending credit to a customer in business and, for example, ask that customer to complete a credit application form and then register a security interest with the PPSR then this may not be sufficient to secure your position ahead of the court if you have not taken the step of obtaining a Credit Check of Fines.
The Super Priority regime has been in place since May 1, 2012. If your security was registered before May 1, your priority is not affected.
Any new securities created after May 1 , however, will be subject to the court's priority if a person's credit check shows fines or reparations are owed within a period of you creating the security or advancing funds. This will be the case unless you can prove that at the time your security was created or funds advanced that no fines or reparation were shown on your customer's Credit Check of Fines.
If you provide credit as part of your business, then it's important to use a properly accredited credit agency to check fines before you extend credit. Then make sure you store that report so you can prove, if necessary, that no fines or reparations were showing as overdue when you created a security and advanced credit.
Elspeth Horner as a partner in Wellington law firm Morrison Kent.
Information in Your Law should not be a substitute for legal advice.
- Sunday Star Times