Ability for Commissioner to recall the loan

Submission

(Matter raised by officials)

Supplementary Order Paper No. 200 was released by the Minister of Revenue on 14 December. The Supplementary Order Paper enables the Commissioner to exercise rights in the loan contract to recall the loan in circumstances such as the borrower not complying with an obligation for two years. Changes included in the Supplementary Order Paper should be included in the bill at the time the bill is reported back.

Comment

No submissions were received on the Supplementary Order Paper.

Currently the Commissioner of Inland Revenue is only able to collect outstanding repayments. While this is sufficient for the majority of borrowers, there is a small minority who do not comply and for whom the recalling of the whole loan together with any outstanding interest and penalties is appropriate.

Although the ability to recall the loan is available in the student loan contract, the person able to exercise this power has changed from year to year as the definition of “lender” in the contract has changed. This can lead to administrative costs in determining which organisation has the right to exercise the recall power and in relation to which part of the consolidated loan balance. Any error can be challenged by the borrower.

As the most appropriate person to exercise the power to recall the loan is the Commissioner, the Supplementary Order Paper proposes that a legislative change be made to provide for this. Officials recommend that the Supplementary Order Paper No. 200 be incorporated in the reported-back version of the bill.

Recommendation

That the submission be accepted.