You will be better able to deal with your debts and the debt collector if you know what your rights are and the best way to arrange repayment.

Debtors Rights

“I don’t believe I owe this money” – what should I do?

Dispute the debt immediately with the creditor, in writing and giving a valid reason(s) for doing so.  You may have already paid, or perhaps you’re not the person who owes the money, or the amount of the debt is wrong.

Set out your reasons clearly, and provide copies of evidence (do not send originals or you may lose that vital evidence).  If you fail to provide evidence your objections may be treated as delaying tactics.  If the debt collectors call, explain clearly and rationally that the debt is in dispute.

Carefully take note of the date and time of the calls and the name of the debt collector.

If you discover you have been listed with a credit reference agency over a disputed debt

Telephone the credit agency immediately asking them either to remove your name or to record next to your name that the debt is in dispute.  We recommend that this be followed up in writing.

If I don’t pay, can the debt collectors take my possessions?

If you get behind on your payments under a secured loan entered into on or after 1 July 1998, or in any hire purchase agreement (regardless of when you signed up) the item you bought on hire purchase or listed as security for the loan may be repossessed.  The repossession agent can only take the secured goods, not anything else.

Do I have to pay collection fees?

Only if you knew about them when you bought (or ordered) the goods or services.  If a debt collection company demands collection costs and the person who is owed the money did not tell you about those costs at the time you requested the goods or services, both the person you ordered the goods from and the debt collector have breached the Fair Trading Act.

Do I have to pay a late fee and interest on an overdue account?

Only if you agreed to do so when you entered into the contract or if a creditor takes you to Court and is successful the Court might order you to pay interest and collection costs. The creditor cannot mislead you by suggesting this will happen automatically.

If I owe the money but can’t afford to pay, what should I do?

Get professional advice on how to approach the creditor and on budgeting so you can make a realistic offer which you can stick to. Broken promises to pay may lead to you not being believed next time.

Sale of Assets

Your present financial difficulties may be solved by selling some of your assets.

Refinancing

You may be able to re-arrange all of your debts so you can make payments on a regular basis.

Reducing Your Commitments

You should look realistically at your situation and see if there is any expenditure which you can reduce or eliminate. For example, you may be able to return non-essential goods under hire purchase which you cannot afford or you can contact the budget advisory service for free advice.

Who do I pay?

If you agree you owe the money, do not assume you should pay the creditor directly, the creditor may have sold the debt, which would mean that you now owe the debt collector and not the creditor.  Debt collection letters should include instructions on who to pay.

Your Personal Credit Record

Each credit reference agency keeps a separate database, which may contain different information about you.

Under the Privacy Act, you have the right to access personal information held about you. You can obtain a copy of your personal credit record, by filling in an application form, supplying a copy of suitable I.D. and must be provided for free, unless you need it within five days. Then a reasonable fee can be charged.

Your credit record may contain names (including aliases), addresses, date of birth, gender, your spouse or de facto partner, your occupation and employer, who enquired about your credit record and when, payment default records, District and High Court Judgments, adverse Tenancy Tribunal hearings, bankruptcy listings, Directorships you hold and credit references. If you have paid off your debts any default registered with Baynet CRA (the largest debtor database) will remain on your credit report for six years and company office, bankruptcy and enquiry details for seven years.

A bad entry on your file does not necessarily mean you will be denied credit. Potential creditors will consider things like the size of the debt, whether you have paid off the debt, how long ago, and whether you have a pattern of incurring bad debts.

If a credit reference agency has entered the wrong information about you, you have the right to ask for it to be changed. Under the Privacy Act, agencies holding information about you must take reasonable steps to ensure that it is accurate and not misleading but they do not have to agree to make the changes you request. They must note your file with a statement of the request you have made so that others can see that the facts are disputed.

We recommend that before debt collectors come knocking at your door you contact your creditors and discuss with them an arrangement to pay off the debt by way of instalments. If this does not prove successful we recommend that you seek professional advice.

It may be that declaring for bankruptcy will allow you to wipe clean the overload of debts with a fresh start in three years.