Consumer Action Law Centre and Financial Counselling Australia say they hope the Australian Securities and Investment Commission’s (ASIC) court action announced today against Cigno and BSF Solutions and their directors, will lead to a final ‘nail in the coffin’ for two of the country’s worst ‘credit’ providers.
“Cigno and BSF Solutions are blatant in their exploitation of people who are in financial strife, making their situations infinitely worse and it is time the law closed them down for good,” said Consumer Action Law Centre CEO, Stephanie Tonkin.
“We still hear weekly from Cigno clients calling our helplines, who are on Centrelink or very low incomes, with legacy loans, paying eye-boggling interest and penalty fees, lured into disastrous debt cycles.
“Stronger regulator actions are essential to stop these practices and ASIC’s action sends the right message to unscrupulous lenders who try to skirt regulation and take advantage of financially vulnerable people in the midst of a cost-of-living crisis,” Ms Tonkin said.
Consumer Action recently launched a free online tool to help people stop paying their loans to Cigno.
ASIC is commencing civil penalty proceedings in the Federal Court against Cigno Australia Pty Ltd, its director Mark Swanepoel and BSF Solutions Pty Ltd and its director, Brenton James Harrison for allegedly providing credit without a licence. ASIC is seeking orders that include pecuniary penalties and injunctions preventing Mr Swanepoel and Mr Harrison from carrying on any business engaging in credit activity.
This follows previous court action by ASIC against similarly named companies (Cigno Pty Ltd and BHF Solutions Pty Ltd) of which Swanepoel and Harrison are also directors. In that case, the Federal Court found that those companies had engaged in unlicensed credit activity, as well. Those two companies used a lending model that appeared virtually the same to consumers as the one that is the subject of the present litigation.
The Cigno Australia and BSF ‘No Upfront Charge Loan Model’ provided short-term credit to more than 100,000 consumers between July 2022 and December 2022 and continued to charge substantial fees to those consumers without either entity holding an Australian credit licence.
Under those contracts, ASIC state that Cigno Australia and BSF Solutions charged fees in excess of $70 million. Some affected consumers were charged fees of more than 600% of their total loan amount.
Financial Counselling Australia CEO Fiona Guthrie said it was heartening to see ASIC acting against Cigno whose behaviour was tantamount to “taking the food from babies’ mouths”.
“Financial counsellors everywhere will be delighted that our regulator is taking action,” Ms Guthrie said. “This company has basically thumbed its nose at the law and is a perfect example of the damage that can be done before the regulator is able to catch up. Indeed, knowing that a regulator has many steps to go through before they can take enforcement action is factored into the business model.”
Ms Guthrie said Cigno’s business model had targeted the poor and vulnerable and was designed to circumvent the law. She also slammed the debt collectors who had been engaged by Cigno.
“It is disappointing that well established debt collectors will do business with a company like Cigno. Regardless of whether ASIC is successful or not with this action, it has been abundantly clear that Cigno’s business model was exploitative. Surely any reputable debt collector would think about this before trying to collect these debts on Cigno’s behalf.
“I would remind any creditor thinking about using a contingent debt collector to conduct appropriate due diligence on the debt collectors they engage.”
Media Contact: Mark Pearce Tel :0413 299 567 E:Mark@consumeraction.org.au