Debt collector fails to check accuracy of information before use
 NZ PrivCmr 12
A father of two young children complained to the Privacy Commissioner after a disputed debt with a childcare centre was referred to a debt collection agency that in turn referred it to a credit reporting agency. The man had withdrawn his children from the centre because he had concerns over his children’s safety while in the centre’s care.
The childcare centre subsequently advised the man that he owed one month’s worth of fees for each of his children because he had signed a contract agreeing to give a month’s notice before withdrawing his children. The father had told the centre that he did not think he should have to pay the outstanding fees because the centre’s failure to provide a safe environment for his children left him with no choice but to remove his children.
Soon afterwards, the debt collection company, Law Debt Collection Ltd (Law Debt), wrote to the man informing him it had been contacted by the childcare centre to collect the outstanding fees.
Law Debt wrote to the man requesting the outstanding sum be paid by a set date. When he received the letter, the man immediately phoned Law Debt, but there was no answer. He left a message saying he disputed the debt, and that he would be out of the country until the next month. Law Debt said it did not receive this telephone message. The man also sent an email to Law Debt repeating the same information as his telephone message.
Law Debt replied to the man’s email, asking him on what basis he was disputing the debt and why he had waited until then to advise Law Debt of this. The man replied, pointing out that Law Debt had only made one attempt to contact him, and that he had responded in a timely manner. He also asked Law Debt to provide more details about the nature of the debt.
An investigation by the Office of the Privacy Commissioner was unable to find any evidence that Law Debt responded to the man’s subsequent email.
Law Debt then posted four letters to the man demanding payment. It advised him it would refer the debt to a credit reporting agency if the debt remained unpaid.
The man wrote back to both Law Debt and the childcare centre explaining in detail why he was disputing the debt. Law Debt says it did not receive that letter until the man attached it to an email some weeks after Law Debt first contacted him. However, by that time, Law Debt had already referred the debt to a credit reporting agency. The man also sent Law Debt information to show that he had made a claim against the childcare centre in the Disputes Tribunal.
This complaint raised issues under principle 8 of the Privacy Act 1993. Principle 8 says an agency that holds personal information shall not use that information without taking reasonable steps to ensure the information is accurate, up-to-date, complete, relevant and not misleading.
Law Debt advised the Office of the Privacy Commissioner that it makes it clear to debtors what is required if they wish to dispute the debt. Law Debt said this is because most debtors say a debt is disputed when it is not. However, it did not provide any evidence to show it explained to the man what he needed to do to prove the debt was in dispute.
Law Debt’s letter also did not explain what steps a person would need to take to show the debt was disputed.
The Office of the Privacy Commissioner found Law Debt breached principle 8 because it did not take reasonable steps to check that the information was accurate, up-to-date and not misleading before using it.
The Office of the Privacy Commissioner said it would have been reasonable for Law Debt to continue to correspond with the man by email, to establish whether or not he had a genuine reason to dispute the debt. Instead Law Debt posted letters to the man, although it knew he would not receive them or be able to respond in a timely manner as he was overseas.
Without taking reasonable steps to check the accuracy of the information, Law Debt referred the matter to a credit reporting agency. Law Debt advised the credit reporter that the debt was not disputed, and that was misleading.
During its investigation, the Office of the Privacy Commissioner also considered the following factors were relevant:
- Law Debt did not provide any evidence showing it contacted the childcare centre to check whether the man had disputed the debt.
- The man had made a complaint to the Ministry of Education about his concerns the centre had not provided a safe environment for his children and the Ministry had upheld his complaint.
- The Disputes Tribunal found in the man’s favour. Law Debt confirmed to the Office of the Privacy Commissioner that the Disputes Tribunal’s finding had led the childcare centre to write off the debt and withdraw the account from Law Debt.
The Office of the Privacy Commissioner formed a final view that Law Debt’s collection breached principle 8 because it did not take reasonable steps to ensure the information about the man’s case was accurate, up-to-date, complete and relevant.
The Office of the Privacy Commissioner advised Law Debt it would be appropriate for it to make an offer of resolution to the man, but it did not respond to the Office on its preliminary or final views on the complaint.
After the Disputes Tribunal found in the man’s favour, he was able to show the judgment to the credit reporting agency to get the default removed from his credit report. However, during the time the default had been listed against his credit record, the man had been unable to renegotiate his mortgage rates with his bank.
He also explained that at the time, his family circumstances were stressful and Law Debt’s actions had caused him additional stress and anxiety. The man says it affected his sleep and he had to take several days off work.
In addition, the Office of the Privacy Commissioner concluded that Law Debt’s attitude to the breach, including its failure to respond to letters, warranted referring the complaint to the Director of Human Rights Proceedings.
It also contributed to the decision to publicly identify Law Debt in accordance with the Office of the Privacy Commissioner’s naming policy.
For more from the Office of the Privacy Commissioner, please visit https://privacy.org.nz/news-and-publications/case-notes-and-court-decisions/.