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ASIC has won its court case against Cigno Australia and BSF Solutions.
The Federal Court has found payday lenders Cigno Australia Pty Ltd (Cigno Australia) and BSF Solutions Pty Ltd (BSF Solutions) engaged in credit activity without an Australian credit licence while charging prohibited fees to consumers.
In addition, the Federal Court determined that Cigno Australia director Mark Swanepoel and BSF Solutions director Brenton Harrison were involved in the unlicensed credit activity along with other Credit Act breaches.
Deputy chair of the Australian Securities and Investments Commission (ASIC), Sarah Court, said the regulator had acted against the two lenders due to concerns that their “No Upfront Charge Loan Model” provided short-term loans totalling over $34 million while charging $70 million in fees to over 100,000 consumers between July 2022 and December 2022.
During this period, it was alleged by ASIC that the model employed by the lenders resulted in consumers being charged excessive fees that surpassed the limits set by the Credit Act.
According to ASIC, some affected consumers incurred fees amounting to more than 600 per cent of their total loan amount.
For example, a borrower with a $200 loan repaid in two months ended up paying $177.75 in fees to Cigno and BSF before that same borrower went on to borrow another $600 and paid another $703 in fees, according to the regulator.
“ASIC has taken regulatory and enforcement action over many years to respond to various business models used by entities connected to Cigno Australia, BSF Solutions, Mr Swanepoel and Mr Harrison,” Court said.
Furthermore, the Federal Court has restrained Cigno Australia and BSF Solutions from recovering any further fees, charges, or other amounts, such as late payment fees and amounts of principal.
ASIC confirmed that a further case management hearing will occur on 21 June 2024 for the consideration of more relief against the respondents including adverse publicity and civil penalties.
In July 2023, ASIC won its case against the lenders to obtain permanent injunctions in the interest of consumer protection.
Prior to this, ASIC had taken action against the lenders around them operating a “continuing credit model” between October 2019 and March 2020.
This lending model was found to be unlawful by the Federal Court in June 2022.
The deputy chair previously stated that ASIC believed this credit model was designed to circumvent consumer protection laws, which enabled the companies to impost significant fees on consumers, many of which were found to be in states of vulnerability and financial stress.
[RELATED: ASIC sues payday lenders]
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