Arrest at border

Sections 162A and 162B of the Student Loan Scheme Act 2011

There is a group of borrowers who persistently default on their student loan repayment obligations. The new legislation strengthens Inland Revenue's ability to deal with those individuals by making it an offence for overseas-based borrowers to continue avoiding repayments. The legislation enables Inland Revenue to request an arrest warrant for borrowers if the District Court is satisfied that a borrower has committed the offence and is about to leave or attempt to leave New Zealand after returning from overseas.

Background

Some borrowers refuse to repay their loans despite having the ability to do so. For this group, applying penalties for overdue payments and potential Inland Revenue debt-recovery action does not deter them from defaulting on their loan repayments. New section 162A makes it an offence for them to continue to do so.

The amendment enables Inland Revenue to apply for an arrest warrant to prevent an overseas-based borrower who is visiting New Zealand from leaving the country if the District Court is satisfied that they have committed the offence.

The provision is modelled on a similar provision in the Child Support Act 1991, under which Inland Revenue can request the District Court to issue an arrest warrant for a liable parent who is about to leave New Zealand with the intent to avoid their obligations.

Similar provisions for student loan borrowers will send a clear message to all borrowers that non-compliance is unacceptable and there are consequences for ignoring repayment responsibilities. This is a targeted measure that will be applied to the worst cases of default, while acting as a deterrent to the wider group of borrowers.

Key features

Section 162A makes it a criminal offence for a borrower who is in default of their overseas-based repayment obligation and who, having been notified by the Commissioner that he or she is in default, knowingly fails, or refuses by the due date specified in the notification to make reasonable efforts to pay the amount in default or to make arrangements with Inland Revenue to pay the amount in default.

Section 162B enables the District Court to issue a warrant for the arrest of a person if it is satisfied that the person has committed the offence and is about to leave or attempt to leave New Zealand.

A person who is arrested under this provision must be brought before a District Court as soon as possible. The District Court may make a range of orders if it is satisfied that the person is about to leave or attempt to leave New Zealand without making reasonable efforts to pay the amount in default or without making arrangements with Inland Revenue to pay the amount in default.

These include orders that the liable person:

• pay the amount in default;
• make arrangements with Inland Revenue to pay the amount in default;
• give security (including the provision of sureties) for the payment of the liability as specified by the court;
• not leave New Zealand without written permission of the court;
• surrender to the court, for a specified period, any travel documents or tickets in the person's possession; and
• provide the court, within a specified period, with any information the court thinks appropriate.

Sections 164 to 166 have been amended so administration of the new offence is consistent with the treatment of other offences under the Student Loan Scheme Act 2011. This includes requiring prosecution of the offence to be done within ten years of the offence being committed, allowing multiple prosecutions using the same documents and allowing prosecutions to be made summarily (enabling a faster court process).

Application date

The amendments apply from the day after Royal assent, being 8 March 2014.