The Financial Services Federation (FSF), the lobby group for non-bank lenders such as finance companies, credit unions, building societies and fintechs, is launching a Responsible Debt Collection Code it says formalises members’ commitment to ethical standards of debt collection beyond what's required by law.
The FSF says its members know if they don't follow the Code it may take disciplinary action against them including revoking their FSF membership. The FSF says it has more than 92 members and affiliate members providing the likes of loans, leasing and credit-related insurance services to more than 1.5 million New Zealanders. It says 48% of personal lending in New Zealand is financed by the non-bank sector represented by FSF members.
The Code applies to the way debt collectors will treat debtors when seeking to recover a debt owed under a credit contract. Debt collection must be in line with relevant law, including: The Credit Contracts and Consumer Finance Act (CCCFA), regulations supporting the CCCFA and guidance in the Responsible Lending Code, while the way credit defaults are recorded against a customer’s name must be in line with the requirements of the Credit Reporting Privacy Code.
The Code sets out that responsible debt collectors won't use physical force, undue harassment, coercion, trespass, misleading, deceptive conduct or unconscionable conduct. Furthermore debt collectors will only contact debtors when there's a purpose to do so, limit this to phone contact or text messages between 6.00am and 9pm, or if outside those timeframes contact will be by email or other electronic means.
Additionally the Code says debt collectors will make no more than a maximum of six actual contacts per week in respect to each debt held by the debtor. Responding to contact from the debtor is, however, in addition to this.
"Only make face to face contact with debtors between 6.00 am and 9.00 pm on weekdays and Saturdays. Face to face contact should not be made with the debtor on Sundays or public holidays. Contact may be made outside of these timeframes if the debtor has specifically agreed that this is acceptable to them," the Code says.
FSF Executive Director Lyn McMorran says the Code has been developed by its members "to spell out how they commit to treating consumer debtors (borrowers) in a responsible manner."
"FSF members agree with the consumer advocacy and financial mentoring sector that unsafe practices being used against mentors’ clients when consumer debt was being collected are unacceptable and not the way in which FSF members behave in their dealings with debtors. This led to members developing the Code to spell out the minimum standard of responsible behaviour expected from FSF members in their debt collection activities," McMorran says.
Commerce and Consumer Affairs Minister Duncan Webb says codes such as the Responsible Debt Collection Code are a useful addition and supplement the law.
"It is good to see the industry take steps to improve debt collection practices, and to set the standard for proper commercial practice," Webb says.
"Preventing unconscionable and misleading practices by debt collectors is important, especially as many debtors will be in vulnerable circumstances, or suffering real hardship. The move to closer cooperation between FSF members and financial mentors, as envisaged in the Code, is a good initiative to further protect consumers from predatory debt collection practices," says Webb.
The Code notes if a debtor/borrower isn't satisfied with how a complaint to a debt collection agency or lender has been handled or resolved, they can take it to a dispute resolution service if the debt collector or the lender belongs to one. These include the Banking Ombudsman Scheme, the Insurance & Financial Services Ombudsman Scheme, Financial Services Complaints Ltd, and Financial Dispute Resolution Service.
The Code will be available on FSF members’ websites and be distributed through FinCap financial mentor networks.
2 Comments
The only change from a bunch of stuff they weren't allowed to do anyway is the contact limitation - except that a lot of creditors simply get around that by using Aussie/US agencies.
This needs to be in law, not a code of conduct. I've had clients being contacted multiple times per day by the same collection agency because the client couldn't/wouldn't cede to the agency's desired outcome - and it wasn't deemed harassment because the agency 'had a financial interest'.
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