Keep calm and cool off

Jimmy’s TV purchase

In December 2011 Jimmy obtained finance from Dinosaur Ltd to buy a new TV.  Weekly loan payments started seven days later.  Under the terms of the loan agreement and the Credit Contracts and Consumer Finance Act 2003, Jimmy had a short time in which to cancel the contract without penalty.

In May 2012, Jimmy sent Dinosaur a cancellation letter and said that in December 2011 he had verbally told Dinosaur’s sales agent that he wanted to cancel within the seven day “cooling off” period. Dinosaur said it had not received Jimmy’s verbal cancellation request and in any event:

  • written notice of cancellation was required, and
  • Jimmy had been making weekly loan payments over a four month period without complaint.

Dinosaur said that Jimmy could cancel the contract and have his payments totalling approximately $730 refunded, but a cancellation fee of $280 would be charged.


FSCL’s review

We looked at the contract Jimmy had signed and noted that:

  • the clause stating that a cancellation fee would be charged where cancellation occurred after seven days was not easy to find, and
  • it was not clear from the wording of the clause exactly what the amount of the cancellation fee would be.

We accepted that Dinosaur was entitled to charge a cancellation fee to recover its costs.  We suggested that the contract wording be changed to make it quite clear that a cancellation fee would apply where the loan contract was cancelled after seven days and how the cancellation fee would be calculated.

Dinosaur said it would consider revising its contract as we had suggested.  In the meantime, it offered to reduce Jimmy’s cancellation fee to $140, in recognition of the fact that disclosure of the fee could have been a lot clearer in the contract.

Jimmy accepted the offer and the complaint was settled.