How to protect your interest as a debtor when goods are repossessed within New Zealand

Introduction

If you owe money under a NZ credit agreement, the creditor cannot repossess the goods unless he or she follows the procedure set down in the CREDIT (REPOSSESSION) ACT 1997. A credit agreement means hire-purchase agreements and other security instruments, such as chattel mortgages (secured loans) and security interests over motor vehicles. (See How to exercise a creditor's right to repossession.)

The Act does not of itself give the creditor a right to repossess: it merely says how repossession must be carried out if the creditor has a right to repossess under your particular agreement. It is an offence punishable by a fine if the creditor repossesses without following the set procedure; if this happens you can also apply to the court for relief (see below).

The Act says that the creditor cannot repossess the goods unless you are in default under the credit agreement (you should look at its particular terms) or if the creditor has reasonable grounds to believe that the goods are at risk of being removed, destroyed or damaged.

No repossession without a pre-possession notice first

The creditor must issue you with a "pre-possession notice" before he or she repossesses (unless the goods are at risk). The notice must:

• state the amount you owe, and
• give you at least 15 days to pay the amount owed

What can I do if the creditor doesn't comply with these notice requirements?

If the creditor doesn't send you the necessary notice before repossessing, or if the notice doesn't comply with the legal requirements, you can apply to the court for relief.

The court has the power to grant any relief it thinks is reasonable in the circumstances, including varying terms of the agreement and awarding you compensation.

In making its decision the court will consider:

• the conduct of the parties
• the nature of your default under the agreement
• other matters that the court thinks are relevant

Usually (depending on the amount involved) you will be able to make your application to the Disputes Tribunal (see How to make a claim to the Disputes Tribunal).

Further, a creditor who breaches the notice requirements commits an offence, punishable by a fine of up to $3,000.

The creditor must send you a post-possession notice

Following the repossession the creditor has 21 days to serve you with a "post-possession notice". The notice must state that you are entitled to get back the repossessed property if, within 15 days of receiving the notice, you either:

• "reinstate", which means to pay everything owed under the credit agreement, plus the costs of repossession and any storage costs, or
• "settle" the agreement, which means to completely pay off or finish the agreement

The creditor must then wait 15 days after serving this notice on you before he or she can resell the goods.

If the creditor breaches these requirements, you will not be liable for the costs of the repossession.

Selling the goods

The creditor is under a duty to take all reasonable steps to find a buyer. In the post-possession notice the creditor is required to include an estimate of the value of the goods; however, you have a right to obtain a valuation of your own if you pay for the cost of the valuation yourself.

Before the goods are sold, you have a right to reinstate the agreement by satisfying all outstanding obligations under the agreement and remedying any default. You also have the right to introduce the buyer or to bid at any auction that takes place. You may also choose to settle the agreement by paying the balance of the amount of credit outstanding, together with any interest and charges payable under the agreement.

What if the creditor doesn't sell the goods?

If the goods are not sold within three months, you can either:

• apply to the court for an order directing the creditor to sell, or
• give the creditor a written notice requiring a sale by public auction

Creditor must send you a statement of account after sale

Within 10 days after the sale, the creditor must send you a statement of account, showing:

• the amount the goods sold for
• the costs and expenses of the sale
• the amount you owed at the date of the sale
• whether there is money left over from the sale or whether you still owe the creditor money, depending on the amount the goods sold for

You will receive a refund if the net proceeds from the sale are greater than the amount required to settle. If the creditor refuses to pay you the refund, you have six months to sue the creditor in court to recover this money.

Cautionary notes

• If you believe that at any time through the repossession and resale process the creditor has infringed your rights or breached the procedure set down in the Act, you should consult a lawyer.