A borrower received the lender's initial disclosure for a consumer credit contract on Monday and now regrets the loan. Under s 27 of the Credit Contracts and Consumer Finance Act 2003, what right does the borrower have?
Correct Answer
D) To cancel by written notice within 5 working days of disclosure, returning the advance.
Under s 27 of the CCCFA, a debtor may cancel a consumer credit contract by giving written notice within 5 working days of the day initial disclosure is made under s 17, or at any time if disclosure was not made. In the ordinary case the debtor must return any advance received within the same period. This is a credit-contract right; it does not create a cooling-off period for the house purchase itself.
Why This Is the Correct Answer
Section 27 allows cancellation by written notice within 5 working days of disclosure, with the advance returned.
Why the Other Options Are Wrong
Option A: To cancel within 10 working days of signing, with no need to repay any money.
Section 27 gives 5 working days from disclosure, and an advance received must be returned.
Option B: None, because a consumer credit contract binds once signed, with no cooling-off.
Section 27 gives debtors a right to cancel within 5 working days of initial disclosure.
Option C: To cancel at any time before the first repayment by telling the lender by phone.
Cancellation must be by written notice within the 5-working-day period, unless disclosure was never made.
Background Knowledge for Finance
Source: https://www.legislation.govt.nz/act/public/2003/0052/latest/whole.html
Exam Tip for Finance
The CCCFA cancellation right applies to the loan, not to the agreement to buy the house.
Common Mistakes to Avoid on Finance Questions
- •Confusing the credit contract cancellation right with a cooling-off right on the house sale.
More Finance Questions
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What is a key advantage of a revolving credit mortgage facility?
When assessing a mortgage application, which factor is typically given the highest priority by New Zealand lenders?
James has been contributing to KiwiSaver for 4 years and wants to withdraw funds for his first home. His KiwiSaver balance is $45,000, but $15,000 consists of government contributions and employer matching. What is the maximum he can withdraw for his house deposit?
What is the main advantage of a table mortgage compared to an interest-only mortgage?
- → What is the maximum amount a first home buyer can withdraw from their KiwiSaver account for a house deposit?
- → What does LVR stand for in New Zealand mortgage lending?
- → What is the key difference between a table mortgage and an interest-only mortgage in terms of monthly payments?
- → A bank checks how much of a borrower's gross income would go on debt repayments. The borrower earns $80,000 a year, already pays $800 a month on other debts, and the new mortgage would cost $2,200 a month. What share of gross income would the repayments take?
- → Sarah earns $80,000 annually and wants to borrow $400,000. What is her debt-to-income ratio?
- → A property is valued at $600,000 and the buyer has a $100,000 deposit. What LVR would this loan represent?
- → Which of the following is NOT typically considered by banks when assessing lending criteria?
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- → Which type of mortgage allows borrowers to make additional payments that can be re-borrowed later?
- → A couple with a combined income of $120,000 wants to buy their first home for $650,000. They have a 15% deposit. What is their LVR?
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