Rental Vehicle Association chief executive Barry Kidd, of Wellington, said companies were looking at ways to pass on information about tourist drivers who had contracts cancelled because of concerns about their driving.
But Apex Car Rentals reservations manager Tony Quinlivan, who is aware of investigations into the blacklisting plan, says ''There are privacy issues''.
''We would do whatever the law allows us to do [but] the law is very clear - we can't do it,'' Mr Quinlivan said yesterday.
''It's a clear, clear breach of [customers'] privacy,'' he said.
Mr Kidd agreed legal issues needed to be considered.
''Whether that's legally possible or not, we need to consider ... that's something that's being [investigated] at the moment,'' Mr Kidd said.
''The police have decided that's not something they will do ... because of legal concerns.
''It's not a simple task [but] we are looking at what can be done to limit the risk.''
Yesterday, the ODT reported Queenstown police were phoning rental car companies to remove unsafe tourist drivers from driving.
The vehicle keys were removed and the driver's contract cancelled.
They had previously used the Land Transport Act to forbid ''incompetent'' overseas visitors from driving, but legal advice earlier this year prevented them from continuing to do so.
Now, police can only forbid someone from driving by arresting them for a qualifying offence, e.g. dangerous driving, and imposing a bail condition.
If that threshold is not reached, there is nothing to stop drivers whose contracts have been cancelled hiring vehicles elsewhere.
Mr Kidd said rental companies were ''keener than anyone'' to have problem drivers off the roads.
''What we're talking about is a very small amount of people causing a disproportionate problem.
''Where police do have concerns ... rental agencies are as keen as the police to remove that risk from the road.
''It's not in our business interests ... as part of the local community or as owners of the asset [having dangerous drivers on the road].''
Mr Quinlivan said rental companies supported the police in any way possible, but instances of drivers having keys taken and contracts cancelled were rare.
''They are not a regular occurrence ... [in] our company, which has got about 20% of the tourist market ... I'm aware of one [instance].''
The New Zealand Transport Agency will today distribute 20,000 steering wheel tags to vehicle rental companies in Queenstown.
The tags have been developed in association with the Rental Vehicle Association and tourism and transport agencies, under the Government's Visiting Drivers Signature Road Safety Project.
Pictures on the tags detail road rules such as keep left, safe speeds, safe overtaking, wearing seatbelts and driver fatigue.
The tags and 20,000 information cards will be distributed as part of an eight-week trial.
The agency will survey self-drive visitors, comparing information and assessing feedback from rental firms.