ASIC has appealed the Federal Court decision which dismissed its allegations that Cigno Pty Ltd (Cigno) and BHF Solutions Pty Ltd (BHF Solutions) contravened the National Consumer Credit Protection Act 2009 (National Credit Act).

Cigno and BHF Solutions operate a lending model that provide small loans to large numbers of consumers and charge substantial fees on those loans.

ASIC alleged that Cigno and BHF Solutions breached the National Credit Act by engaging in credit activity without holding a credit licence.

On 23 June 2021, the Federal Court dismissed ASIC’s application.

‘We have appealed this decision because we are concerned its effect will be to limit the application of the credit legislation, potentially denying vulnerable consumers the protections afforded by the National Credit Act and National Credit Code,’ ASIC Commissioner Sean Hughes said.

ASIC’s appeal seeks judicial clarification on the operation of key obligations under the credit legislation which ensure it is effective in preventing consumer harm. The National Credit Act and National Credit Code impose important obligations to protect consumers, including disclosure requirements, caps on fees and interest rates, hardship provisions and free access to independent external dispute resolution services.

The appeal will be heard by the Full Federal Court on a date to be determined.

Background

On 29 September 2020, ASIC commenced proceedings against Cigno and BHF Solutions seeking declarations and injunctions (20-226MR). In the proceedings, ASIC alleged:

• BHF Solutions contravened section 29 of the National Credit Act by engaging in credit activities without holding an Australian credit licence by entering into a credit contract with a borrower and carrying on a business of providing credit; and
• Cigno contravened section 29 of the National Credit Act by engaging in credit activities without an Australian credit licence by performing obligations and exercising rights of BHF Solutions in relation to BHF Solution’s credit contract with the borrower and providing a credit service to the borrower.

On 23 June 2021, the Federal Court dismissed ASIC’s application, finding Cigno and BHF Solutions did not contravene the National Credit Act (21-144MR).

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Editor's note:

The appeal was heard by the Full Federal Court on 23 November 2021 and the decision is reserved.