Yesterday, the Otago Daily Times reported the centre had complained to the Commerce Commission about Rapid Loans' use of the clause, and the watchdog had decided to investigate.
It then emerged yesterday that Rapid Loans contacted the Dunedin Budget Advisory Service (DBAS) this week to advise it was dropping the clause.
In an email to DBAS, the lender said its revised contract did not contain the clause and ''Rapid Loans undertakes not to exercise the power-of-attorney clause in your client's credit contract''.
''We trust that this resolves your concerns,'' the email said.
Law centre board member University of Otago Associate Prof Barry Allan said it was a good move.
''I am very pleased that Rapid Loans have seen fit to amend their terms in this way, as it makes consumers less vulnerable.
'' I think it also reflects the importance of seeking assistance from entities like budget advisory services and community law centres, because consumer credit contracts are complex documents, difficult for many people to understand,'' Prof Allan said.
He had warned the clause gave the lender the right to make deductions at will from a borrower's bank account.
Rapid Loans has not responded to requests for comment.
