Beware of your obligations under the Credit (Repossession) Act 1997

January 21, 2014

in Banking & Finance

iStock_000017298013SmallA recent settlement between Baycorp and the Commerce Commission has sent a strong message about the importance of adhering to your obligations under the Credit (Repossession) Act 1997 (“CRA”).

Under the CRA a lender is prohibited from recovering more than the outstanding balance debt after goods have been repossessed and sold.  The issue before the Commerce Commission was Baycorp’s practice of adding on collection costs, legal and court costs as well as interest, onto a debtors’ balance after the repossessed security items had been sold.

This sends a strong message to all companies involved in lending, repossession and debt collection that once a security item has been repossessed and sold, the CRA prohibits you from recovering more than the debt balance after deducting the net sale proceeds from the sales item.  The Commerce Commission also noted with concern that many lending agencies were unaware of their obligations under the CRA and the limits within which they can act.

The result of the Baycorp settlement with the Commission was that Baycorp agreed to refund debtors, or reduce debtors’ balances by a total of $3.5million.  There are therefore potentially significant consequences for lending, repossession and debt collection agencies, which breach their obligations under the CRA.

The Commission also noted that breaches under the CRA could lead to claims under the Fair Trading Act in that a company could be found to have “made a false or misleading representation concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right, or remedy” and therefore potentially give rise to liability to pay damages to debtors.

We are specialists in this area and therefore can assist you with legal advice and support to ensure that you adhere to your obligations under the CRA and the Fair Trading Act.

If you require any further advice or further information on matters dealt with in this publication please contact the lawyer at Farry and Co who normally advices you, or alternatively contact:

Kirsten Maclean

(03) 477 8870 or (09) 379 0055


The information contained in this publication is intended as a guide only.  It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain. 

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