Office of the Privacy Commissioner | Case Note 205558 [2010] NZPrivCmr 1: Debt collector fails to follow procedure and loads disputed debt with credit reporter
A woman incurred a small debt which was transferred to a debt collector due to her failure to pay it by a certain time. The woman contacted the debt collector and advised it that she disputed the debt. Ten days later, the debt collector transferred the debt to a credit reporter, who then loaded it as a default on the woman's credit report.
The woman ultimately paid the debt but she was not happy that her disputed debt had been transferred to a credit reporter.
Principle 8 of the Privacy Act
Principle 8 of the Privacy Act provides that an agency must not use personal information without taking reasonable steps to ensure that it is accurate, up-to-date, complete and not misleading.
In this case, the debt collector was clearly put on notice that the woman had disputed the debt but transferred it to the credit reporter anyway.
During our investigation we learned that the transfer process between the debt collector and the credit reporter is an automated process. To comply with the accuracy aspect of principle 8, a manual notation has to be added to the record.
Debt collectors and credit reporters rely on express contractual obligations to ensure that information exchanges relating to unpaid debts are accurate.
In this case, although the woman disputed the debt this fact was not recorded by the debt collector. As a result, the debt was automatically transferred to the credit reporter, without reference to it being under dispute. In our view this was a breach of principle 8.
However, the woman was unable to show that the presence of the default on her credit report - and, therefore, the breach of principle 8 by the debt collector - caused her any harm in this case.
The debt collector agreed to review and improve its processes in terms of principle 8 and provide training to its staff to ensure that this type of situation did not recur. This was a very positive outcome and we closed the file.
March 2010
Accuracy of personal information - debt collector - transfer of debt to credit reporter - failure to follow standard procedure - Privacy Act 1993, principle 8