If in doubt, always consult the rule book:
7.9.3 Course Deviation
A “DNF” or a time penalty, if so specified in the supplementary regulations,
shall be charged for any uncorrected deviation from the course for failing
to directly follow the prescribed course route from the stage line through
the timing start line or for unnecessarily delaying the event. A course deviation
shall not be charged if any part of the car hits a marker defining the
limits of the course. A DNF is charged only if part of the course is omitted.
In returning to the course after an off-course excursion, it is acceptable to
drive a part of the course a second time.
In this case, it looks like the event officials have some discretion in how to score this incident. In general, you score a DNF when a competitor skips part of the course or takes a shortcut. When leaving the course, it is totally legitimate to re-enter the course "upstream" and run part of the course twice. In this case, the competitor did not take a shortcut, and there was no time advantage by taking the extra run through the loop. However, you have the option to score the run as a DNF due to the delay it caused.
If you scored the run as a good run, I suggest you let it stand, but, if you run a similar course, with a loop that needs to be completed twice, again in the future, I would communicate upfront that running the loop too many times will result in a DNF. Then, it will be clear, and there will be no arguments.