The Federal Court has dismissed ASIC’s application in relation to alleged breaches of consumer credit provisions by Cigno Pty Ltd (Cigno) and BHF Solutions Pty Ltd (BHF Solutions), finding that the lending model they operated did not contravene the National Consumer Credit Protection Act 2009 (National Credit Act).
BHF Solutions and Cigno operate a lending model that provides small amounts of credit to a large number of consumers and charges substantial fees on the amounts borrowed. Neither BHF Solutions nor Cigno holds, or has ever held, an Australian credit licence.
ASIC commenced proceedings against Cigno and BHF Solutions in September 2020 seeking declarations of contravention and injunctions (20-226MR).
‘ASIC took this case in order to protect vulnerable consumers from what we believed to be a harmful lending model,’ said ASIC deputy chair Sarah Court.
‘ASIC will carefully consider the judgment before deciding on our response’.
Cigno previously operated a similar model under the short-term credit exemption under s6(1) of the National Credit Code. On 12 September 2019, ASIC made an industry wide product intervention order by way of legislative instrument in relation to short term credit (19-250MR) and Cigno ceased operating this model. ASIC made this order after it was satisfied that the product resulted in significant consumer detriment, due to the excessive overall cost of the product.
Cigno’s application to the Federal Court to quash the product intervention order was unsuccessful (20-089MR). In May 2020, an appeal was filed, which was heard by the Full Federal Court on 19 November 2020. Its decision is reserved. The product intervention order lapsed in March 2021.