Cancellation of loan contracts

(Clause 6)

Summary of proposed amendment

The proposed amendment will allow a person to cancel their loan contract in writing or by electronic means.

Application date

The amendment is deemed to have come into force on 1 January 2012, when the current provision came into force, to ensure that borrowers who have already had their cancellations accepted by electronic means are not inadvertently in breach of the law.

Key features

The proposed amendment to section 15 will change the requirement for cancellation of a loan contract from “formally notify” to “notify in writing”. The latter term is already defined for the purposes of the Student Loan Scheme Act 2011 and allows communication by electronic means, subject to compliance with relevant provisions of the Electronic Transactions Act 2002.

Background

Before January 2012, cancellation of loan contracts by electronic means was acceptable in accordance with the terms of the contract. However, an earlier amendment to the Act imposed a requirement of cancellation by formal notification, which, in accordance with the definition of that term, excludes notification by electronic means.

Following advice of their entitlement to a student loan, a student has seven days in which to give notice of their intention to cancel the contract. It is therefore more efficient, and in accordance with the Ministry of Social Development’s current procedures, to accept cancellation by electronic means.

In addition, the 2012 change was one of a number intended to ensure consistency with the spirit and intent of the Credit Contracts and Consumer Finance Act 2003, even though that Act allows cancellation of contracts by giving written notice, including in electronic form.