New code for debt collectors

A Responsible Debt Collection Code has been launched by the Financial Services Federation (FSF).

Wednesday, October 11th 2023, 9:54AM

by Sally Lindsay

Under the code FSF members will limit the contact they have with a debtor to certain hours of the day, including not making face-to-face contact on Sundays (unless by prior arrangement with the debtor) and only where there is a genuine purpose for them to make such contact.

FSF’s debt collection members will, if the debtor prefers, work with a financial mentor or an authorised representative appointed by the debtor (with an appropriate privacy waiver in place). The code also outlines where debtors can go to make a complaint about the debt collector’s activity.

The code formalises FSF members’ commitment to ethical standards of debt collection practices that go beyond what is required by law.

The FSF represents 90 responsible non-bank finance providers across the country. About 48% of personal lending in New Zealand is financed by the non-bank FSF members.

Executive director Lyn McMorran says the federation’s members understand that if they don’t follow the code, they could face disciplinary action including having their FSF membership revoked.

She says the FSF agrees with the consumer advocacy and financial mentoring sector that unsafe practices used against mentors’ clients during debt collection are unacceptable and not the way members behave when dealing with debtors.

“This led to members developing the code to spell out the minimum standard of responsible behaviour expected in their debt collection activities.”

The code will be made public on FSF members’ websites and distributed through the financial mentor networks of FinCap, the national umbrella organisation for financial mentors in NZ.

Commerce and consumer affairs minister Duncan 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.”

He says codes like this are a useful addition and supplement the law – people collecting on loan defaults are already prohibited from acting in ways which are oppressive, harsh or unconscionable, and must comply with reasonable standards of commercial practice. It is good to see the industry take steps to improve debt collection practices, and to set the standard for proper commercial practice.

The Code was launched in Wellington this week, attended by members of the federation, several political party candidates, representatives from financial dispute resolution schemes and other financial services sector associations.

Tags: FSF