Your rights and obligations: When you can cancel a credit contract
Different rights to cancel at different times
Credit Contracts and Consumer Finance Act 2003, ss 27–31, 35
You have various rights to cancel a consumer credit contract. The extent of your cancellation rights depends on whether the lender has given you all the information they’re required to in their “disclosure statement”, see “The information you must be given” at the beginning of this section.
If you have been given this information, then you have a “cooling-off period” (usually five working days) immediately after you get that information. You can cancel the contract at any time during this cooling-off period (for more details see below, “Cancelling during the ‘cooling off’ period”).
If you haven’t been given this information, you can cancel at any time. You’ll need to return any goods you’ve received. If you’ve already received services, you’ll have to pay the cash price for the services within 15 working days after cancelling. If the lender gives you all the necessary information later on, and you haven’t already cancelled by then, the cooling-off period starts at that point.
If you cancel, you may have to pay:
- the lender’s cancellation expenses – but these must be reasonable
- interest for the time that you had the credit
- for any damage to goods that happened while you had them.
Credit Contracts and Consumer Finance Act 2003, s 29
Note: There’s usually no right to cancel short-term consumer credit contracts – that is, when credit is provided for a period stated in the contract that’s less than two months. There’s also no right to cancel a consumer credit contract on the ground that disclosure hasn’t been made to a guarantor (see “Guarantors”)
Cancelling during the “cooling off” period
Credit Contracts and Consumer Finance Act 2003, ss 27, 28, 30, 31
If you’ve signed a consumer credit contract, the law then gives you a “cooling off” period – usually five working days – during which you can change your mind and cancel the contract.
The length of the cooling-off period depends on how the lender gave you the necessary information:
- If the paperwork was handed to you directly, you have five working days.
- If it was sent to you electronically (by email for example), you have seven working days.
- If it was mailed to you, you have nine working days from the date it was posted.
Note: The cooling-off period starts once the lender has given you all the information that the law requires. If the lender hasn’t given you all the necessary information, you can cancel the contract at any time.
How do I cancel?
The cancellation must be in writing. It can be worded in any way that shows you intend to cancel the contract. Consumer Protection has a template cancellation notice you can use, on its website www.consumerprotection.govt.nz
What cancelling means for different kinds of credit contracts
If you cancel a consumer credit contract, either during the cooling-off period or when the lender has failed to give you all the information the law requires, you’ll need to do different things depending on the type of credit arrangement it is.
- If it’s a hire purchase (“credit sale”) for goods or services, your rights will depend on whether you’ve already received the goods or services before you cancel:
- If you’ve already received the goods or services, you’ll only be able to cancel the credit part of the contract, so you’ll still have to pay the cash price of the goods or services. You’ll have 15 working days to do this after you cancel.
- If you haven’t already received the goods or services, you can cancel the whole contract, and you won’t have to pay for the goods or services.
- If it’s a loan, and you’ve already received money under the loan contract, you can cancel the whole contract by returning the money within the cooling-off period.