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20-089MR Federal Court upholds ASIC's product intervention order on short term credit
On 20 September 2019, Cigno Pty Ltd (Cigno) filed a judicial review application in the Federal Court of Australia seeking to challenge ASIC’s product intervention order in respect of short term credit. Cigno’s review application was dismissed by the Court and the product intervention order remains in force.
The matter was heard on 30 March 2020 and today Justice Stewart handed down his decision dismissing Cigno’s application with costs awarded to ASIC.
In his judgment, Justice Stewart found ASIC is entitled to consider “detriment caused indirectly by the financial product or a class of financial products in the sense of there being something in the circumstances of the availability of the product or the class of products to retail clients that causes the detriment”.
“In my view ASIC’s delegate identified the relevant class of financial products as being short term credit or short term credit provided in particular circumstances, namely as part of the short term lending model.”
“…s 1023D(3) provides for the exercise of the product intervention order power on the basis not only of detriment that has actually occurred, but also detriment that ‘will or is likely to’ occur as a result of a class of financial products. Thus, there need be no existing product, let alone more than one, for the power to be able to be exercised.”
ASIC Commissioner Sean Hughes said “ASIC will continue to act to protect consumers, in particular where we see evidence of significant harm”.
Mr Hughes added “We are pleased today’s judgment upheld our intervention order and the consumer protections it is designed to deliver. We will continue our efforts to protect vulnerable consumers, particularly during this time when significant numbers of people are facing uniquely challenging circumstances. We will move swiftly where we see high cost products that seek to exploit the day-to-day immediate needs of financially vulnerable consumers.”
On 12 September 2019 ASIC made a product intervention order by way of legislative instrument in relation to short term credit: 19-250MR. The order came into force on 14 September 2019 and Cigno was an affected party.
The order followed ASIC’s consultation on the proposed intervention to stop significant consumer harm in short term credit.
On 20 September 2019 Cigno made an application in the Federal Court of Australia in New South Wales seeking an order to quash the product intervention order and a declaration that the short term credit order is invalid.
On 13 May 2020, Cigno Pty Ltd filed an appeal with the Federal Court of Australia.