Debt collection industry on notice about misleading tactics

Issued 18 October 2018
Release no. 56

The Commission is reminding debt collectors of their legal obligation to avoid misrepresenting consumers’ rights, as it warns one business about its conduct.

Debt collector Intercoll Limited has been warned by the Commission for likely breaching the Fair Trading Act when it told a debtor that if she wanted to question her debt she should contact the company to which she originally owed money. The debtor was told that she needed to pay Intercoll the disputed amount, and if the dispute with the original lender was successful, then Intercoll would pay the money back.

This was incorrect because Intercoll had purchased the debt and the debtor should have been able to dispute the debt direct with Intercoll.

The Commission also advised Intercoll to take care in the future to avoid making statements to debtors which may have given the impression that court action was inevitable if the debtor did not make payment, when in fact this consequence was only a possibility at the time the representation was made. Unless the creditor has approved the debt for collection through the courts, the Commission says that these claims may mislead consumers about their position.

Commissioner Anna Rawlings said complaints to the Commerce Commission about debt collection have increased in the past year and debt collectors need to ensure that they have systems in place to ensure compliance with their legal obligations to debtors.

“While debt collectors often need to discuss the nature of a debt and the consequences of non-payment with a debtor, they must not use misleading techniques to pressure debtors into paying or to deter them from pursuing genuine disputes. This includes saying that a debtor cannot dispute a debt, telling them that court action will commence within a certain timeframe when it may not or giving the impression that certain outcomes are inevitable if they are not,” she said.

Ms Rawlings said that while debtors need to pay any overdue debt it is also important that they are not misled when it comes to debt recovery.

“If consumers want to dispute their debt, we suggest they contact the debt collector early to find out what the disputes process is before any problems escalate. If there is a genuine dispute over the debt, the debt collection process should stop while this is resolved,” she said.

Background
Intercoll Limited
Intercoll provides services in debt recovery, tracing, document service, repossession and credit reporting.

While the Commission has issued a warning to Intercoll for likely breaching the Fair Trading Act, only the courts can decide if there has actually been a breach. You will be able to read a copy of the Warning to Intercoll here.

Debt collection
You can read more about debt and debt collection on the Consumer Protection website.

In the last financial year the Commission received 125 complaints about 37 different debt collection agencies. In the previous 2016/17 financial year we received 98 complaints about 33 different debt collectors.

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