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ASIC has commenced civil penalty proceedings in the Federal Court accusing two payday lenders of providing credit without the necessary licence.
The regulator is pursuing declarations, pecuniary penalties, adverse publicity orders, and permanent injunctions restraining Cigno Australia and BSF from engaging in credit activities or collecting fees or charges related to loan agreements operating under the ‘no upfront charge loan model’.
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This development follows previous legal action by the regulator, where the Federal Court found that both lenders were involved in credit activities without possessing an Australian credit licence.
In July 2023, upon remittal, the Federal Court granted declarations and injunctions against Cigno and BHF.
The ‘no upfront charge loan model’ employed by Cigno Australia and BSF provided short-term credit to over 100,000 consumers between July 2022 and December 2022.
During this period, both entities continued to levy substantial fees on these consumers despite lacking an Australian credit licence.
ASIC alleges that this model resulted in consumers being charged excessive fees that exceeded the limits set by the Credit Act.
Some affected consumers incurred fees amounting to more than 600 per cent of their total loan amount.
In an example provided by the regulator, a borrower with a $200 loan repaid in two months ended up paying $177.75 in fees to the lenders, before that same borrower went on to borrow another $600 and paid another $703 in fees.
Deputy chair of ASIC, Sarah Court, said: “ASIC believes that this credit model has been designed to circumvent consumer protection laws, enabling these companies to impose significant fees on consumers, many of whom are vulnerable and in financial distress.”
ASIC alleges that BSF provided over $34 million in loans, while Cigno Australia and BSF collectively charged over $70 million in fees, all without holding an Australian credit licence.
Ms Court added: “ASIC has taken this matter to Court to halt what we consider to be a harmful lending model and to shield consumers from excessive fees and charges.”
Furthermore, ASIC claims that both Cigno Australia director Mark Swanepoel and BSF director Brenton James Harrison were actively involved in the unlicensed activity and Credit Act breaches.
ASIC intends to seek injunctions that would prohibit Mr Harrison and Mr Swanepoel from engaging in or participating in any business that conducts credit activities.
The date for the first case management hearing is yet to be scheduled.
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