Tougher controls for repo agents
The Government has accepted calls from the Law Commission to stop repossession crews taking people's passports, medical gear, bedding, ovens and fridges, and will introduce tougher penalties and a licensing regime.
Having been "self-enforcing" since their introduction, the rules on repossession will be policed by the Commerce Commission under a draft law to go before Parliament by early next year.
Repossession agents will go from having virtually no sanctions to being subject to criminal offences, civil remedies and statutory damages if they break the rules around actions such as entering houses and taking items.
The announcement is the first concrete victory in a long battle for change waged by consumer and poverty advocates and Maungakiekie National MP Sam Lotu-Iiga.
In a report to its minister, the consumer affairs ministry admitted the current legislation was stacked in favour of creditors.
Bullying, aggression and wrongful repossession seemed to be going unpunished, it said.
The report, released under the Official Information Act, backs the Law Commission's main recommendations for improvement. One exception was a proposal to allow repossession on Sundays, on which the ministry was agnostic.
Consumer Affairs Minister Simon Bridges confirmed the Credit (Repossession) Act would be merged with a bigger draft consumer law he planned to introduce to Parliament later this year or early next year, the Credit Contracts and Consumer Finance Bill.
He said the change would bring the whole "life cycle" of consumer credit contracts under a single law and make the Commerce Commission responsible for enforcing repossession rules.
Other planned changes confirmed by Bridges included:
Items that can be repossessed will have to be itemised in loan and credit contracts, marking the end of "dragnet" clauses covering all personal property.
Certain items will not be able to be repossessed unless the loan was taken out specifically to buy them. Items likely to be on the banned list include medical equipment, bedding, portable heaters, stoves, washing machines, cooking equipment, refrigerators, passports, identity documents and credit and eftpos cards.
Repossession agents will have to be licensed, of suitable character and without serious criminal convictions.
Repossessions will come under the responsible lending principles in the Credit Contracts and Consumer Finance Bill. That means creditors and repossession agents will have to act responsibly when carrying out repossession and it may prevent agents taking virtually worthless items with sentimental value, such as children's toys.
Credit collection agency Baycorp said it supported the restrictions on repossessing necessary and sentimental items and the proposed licensing regime despite the fact that licensing would "undoubtedly" result in increased compliance costs.
But Baycorp said the proposed power to provide compensation to debtors should be exercised "very sensibly" to avoid the risk of abuse.