There are rules lenders or repossession agents must follow when repossessing goods.
When do repossession rules apply
The repossession rules apply:
if your business has taken an interest in consumer goods to secure a consumer credit contract
you have the right to repossess the goods and/or a right to enter premises to repossess or inspect them
the borrower is in default or the goods are at risk.
Only consumer goods specifically identified in the consumer credit contract can be repossessed. There are also restrictions on taking security over, and repossessing, certain household necessities and some important documents.
What cannot be repossessed?
Essential items
You can not take a security interest in essential items such as:
beds
bedding
cooking equipment (including stoves)
medical equipment
heaters
washing machines
fridges.
The exception is when the goods are the subject of a Purchase Money Security Interest (PMSI) – this is when the money was borrowed to buy those particular items.
Important documents
You can not take security or repossess the following kinds of important documents:
travel documents
identification documents
bank cards.
Lender responsibilities
You (or any repossession agent you engage) must comply with the Lender Responsibility Principles when carrying out repossession. This means you must:
exercise the care, diligence and skill of a responsible lender
comply with specific lender responsibilities set out by law, such as:
not exercising a right or power over the borrower in an oppressive manner
meeting all your legal obligations as a lender
treating a borrower and their property reasonably and in an ethical manner, including:
taking all reasonable steps to ensure goods and property are not damaged during the repossession process
making sure repossessed goods are adequately stored and protected
exercising your right to enter the property a reasonable manner.
You will commit an offence if you (or your repossession agent):
repossess consumer goods when the borrower is not in default
repossess consumer goods when the goods are not at risk
have not specifically identified the goods to be repossessed in the consumer credit contract before:
repossessing those goods
entering premises in order to repossess those goods
entering premises for any other purpose in connection with those goods
have not issued the correct repossession warning notice
do not produce the correct documents if someone is present when they enter residential premises for the purpose of repossession
do not leave a notice and secure the premises if there is no-one present when they enter residential premises for the purpose of repossession
enter residential premises for the purpose of repossession before 6am or after 9pm or on a Sunday or a public holiday, without written consent – written consent must be obtained
take a security interest over any of the essential consumer goods or documents.
Penalty
Any breach of the repossession rules is an offence and on conviction, individuals are liable for fines of up to $200,000 and companies of up to $600,000.
Repossession Guidelines
The Repossession Guidelines set out our intended approach to enforcing the repossession provisions of the Credit Contracts and Consumer Finance Act.
