If you run a trade business and you're owed money, sooner or later you'll think about debt collection. NZ has clear rules about how debts can be chased, who can do it, and what it costs you. This guide covers debt collection in NZ in plain English: what a debt collection agency actually is, what the law lets collectors do, the typical process, and the price you'll pay to get your money back.

What is a debt collection agency?

A debt collection agency is a business that chases overdue debts on behalf of someone else. So if a customer hasn't paid your invoice, you hand the debt to the agency, and they pursue payment for you. They take a fee or a cut of whatever they recover.

There are two common models. Some agencies buy the debt off you outright at a discount, then keep whatever they collect. Most NZ debt collection agencies, though, work on a commission basis: they chase the debt as your agent and take a percentage of what comes in. For a tradie chasing a few unpaid invoices, the commission model is far more common than selling the debt.

It's worth knowing what a debt collection agency is not. They aren't a court, they can't seize your customer's property, and they can't force payment on their own. Their power comes from persistence, knowing the process, and the implied next step of legal action. Everything they do still has to stay inside the law.

Debt collection in NZ: the legal rules

There's no single licence you need to be a debt collector in New Zealand, but collectors are bound by consumer and fair trading law. The main one is the Fair Trading Act 1986, which bans misleading, deceptive, and harassing conduct. A collector can't lie about what they'll do, pretend to be a court official, or harass your customer with constant calls.

The Commerce Commission enforces these rules and publishes guidance on debt collection and consumer rights. If a collector crosses the line, that's where complaints go.

You also need to watch the clock. Under the Limitation Act 2010, there's generally a six-year limit to take court action to recover a debt, counting from when the debt fell due. Chase it sooner rather than later. If your dispute is genuine and under $60,000, the Disputes Tribunal is a cheap, lawyer-free option. For larger or clear-cut debts, the District Court handles civil claims. For a fuller breakdown of the legal side, see our guide on debt collection laws NZ and your legal rights chasing unpaid invoices NZ.

What debt collectors can and can't do

Here's a plain rundown of the boundaries every collector in NZ has to stay inside:

Debt collectors CAN	Debt collectors CANNOT
Contact the debtor by phone, letter, email or text	Harass, threaten, or use abusive language
Ask for payment of a genuine, owed debt	Pretend to be a lawyer, court, or bailiff
Set up a payment plan or arrangement	Misrepresent the consequences of non-payment
Add reasonable, agreed collection costs	Add random fees you never agreed to
Recommend or start court action for the creditor	Seize goods or enter property without a court order
Report a default to a credit agency (with notice)	Contact the debtor at unreasonable hours repeatedly

If any agency you're considering is happy to bend these rules, walk away. Dodgy collection tactics can land you in trouble too, since they're acting on your behalf.

The debt collection process step by step

Most NZ debt collection follows a predictable path. Knowing it helps you decide how far you want to go.

Reminders first. Before involving anyone, send your own overdue notices. A clear overdue invoice reminder email resolves a surprising number of late payments at no cost.
Formal demand. If reminders fail, a firm letter of demand sets out the amount, the due date, and a deadline. This is often where a collector or agency steps in.
Agency contact. The agency contacts the debtor by phone and in writing, negotiates payment, and may set up an instalment plan.
Default listing. With proper notice, an unpaid debt can be listed on the debtor's credit file, which is a strong motivator.
Legal action. As a last resort, the matter goes to the Disputes Tribunal or District Court. Winning gets you a judgment, which can then be enforced.

For most trade businesses, the goal is to get paid at step two or three without burning the customer relationship or paying court fees.

What debt collection in NZ costs

Cost is where the models differ most. A typical commission-based agency charges anywhere from around 10% to 30%+ of the amount recovered, sometimes more on older or harder debts. On a no-recovery-no-fee deal you pay nothing if they collect nothing, but the percentage is higher. Some firms charge upfront or per-action fees instead.

The maths matters. On a $1,000 invoice, a 25% commission means you only see $750 back, and that's if they recover the full amount. On small invoices, the commission can swallow a big chunk of your margin.

That's why some tradies prefer a flat, predictable cost for the earlier, friendlier stage of follow-up. TradeFlow's done-for-you calling service has real people phone your customers about unpaid invoices on your behalf for a flat monthly fee plus a small per-invoice charge, recovering most invoices within a couple of weeks before things ever reach hard collection. If you want a softer first step, you can get in touch here.

For a wider view of your options, our guides on small business debt recovery NZ and how to collect unpaid invoices NZ walk through the full ladder from gentle reminder to formal recovery.

Frequently asked questions

What is a debt collection agency, in simple terms?

It's a business you hire to chase money owed to you. The agency contacts your customer, negotiates payment, and usually takes a percentage of whatever it recovers. It can't force payment or seize property on its own; that still needs a court.

Is using a NZ debt collection agency legal?

Yes. There's no special licence required, but any debt collection agency NZ-wide must follow the Fair Trading Act 1986 and other consumer law. They can't harass, mislead, or threaten your customers, and the Commerce Commission enforces those rules.

How much does debt collection in NZ cost?

Most charge a commission, often 10%–30%+ of what they recover, with higher rates for older debts. Some charge upfront or per-action fees. Friendly invoice follow-up calling is usually a cheaper, flat-fee option for early-stage chasing.

How long do I have to chase a debt?

Under the Limitation Act 2010 you generally have six years from when the debt fell due to take court action. After that the debt becomes much harder to enforce, so don't sit on overdue invoices.

Sources

Update log

16 June 2026 — Published. Figures fact-checked against New Zealand government sources, including the Disputes Tribunal’s $60,000 jurisdiction limit (effective 24 January 2026, Ministry of Justice) and the six-year limitation period under the Limitation Act 2010. See Sources above.

Last reviewed: 16 June 2026.