iscover 
Cigno Australia was ordered to pay $3 million, its director Mark Swanepoel $500,000, and BSF Solutions $3 million, its director Brenton Harrison $500,000.
The order follows the Australian Securities and Investments Commission’s (ASIC) successful case against the two lenders, relating to their use of the “No Upfront Charge Loan Model”.
On 3 October 2023, ASIC began civil penalty proceedings in the Federal Court against Cigno Australia, Swanepoel, BSF Solutions, and Harrison for allegedly providing credit without an Australian Credit Licence.
On 24 May 2024, the Federal Court found Cigno Australia and BSF Solutions engaged in credit activity without a licence and charged consumers prohibited fees. The court also found that Swanepoel and Harrison were involved in the unlicensed activity and other Credit Act breaches.
ASIC said that the model provided $34 million in short-term loans to over 100,000 customers between July 2022 and December 2022, generating tens of millions back in fees.
ASIC chair Joe Longo said: “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.
“ASIC believes their No Upfront Charge Loan Model was designed to sidestep consumer protections laws and put consumers at risk.
“From July 2022 to May 2024, Cigno Australia and BSF Solutions charged consumers more than $90 million in fees.
“Today’s outcome demonstrates ASIC’s commitment to protecting Australians from predatory lending practices and holding individuals and companies accountable for their actions.”
During the period of operation, 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.
In delivering his judgment, Justice Jackman said: “ASIC submits, and I accept, that the respondents’ decision to operate that model denied consumers important protections under the Credit Act and Credit Code.
“In relation to the No Upfront Charge Loan Model, those protections included limits on the fees and charges that can be imposed for the provision of credit.”
[Related: ASIC warns auto finance lenders to raise standards]
Want to see more stories from trusted news sources?Make Broker Daily a preferred news source on Google.