Cigno Pty Ltd (Cigno) and BHF Solutions Pty Ltd (BHF Solutions) were found to have engaged in credit activities without an Australian credit licence by the Federal Court, the Australian Securities & Investments Commission (ASIC) reported.
An injunction was given so that the two companies will be prevented from collecting repayments and fees from their customers with loans that were provided by their lending model, which was found to be harmful.
“ASIC took this case to stop a harmful lending model, one which circumvented Australian credit laws and regulations and charged excessive fees and charges to many vulnerable consumers,” said Karen Chester, ASIC Deputy Chair.
ASIC first began the court proceedings by taking the matter of BHF Solutions writing more than 1,000 loans per day to the court in 2020. The commission said that “Cigno and BHF Solutions operated a lending model purporting to rely on an exemption in the National Credit Code and claimed they did not require an Australian credit licence.”
Initially, the commission’s application was dismissed in June 2021 after the Federal Court found that BHF Solutions and Cigno did not violate the National Credit Act. However, the ASIC appealed this to the Full Federal Court a month later and succeeded to continue the case in June 2022.
After a series of appeals during the litigation by both companies, the court eventually found that the two companies used such a lending model to avoid the provisions of the National Credit Act and National Credit code, which protect consumers from disproportionate charges and fees.
The Federal Court’s decision also allowed ASIC to obtain permanent injunctions against Cigno and BHF Solutions.
“ASIC expects that Cigno and BHF Solutions will notify any affected consumers to ensure they are not paying any fees or charges covered by the injunctions. ASIC also expects that both entities have processes in place to ensure ongoing compliance with the injunctions,” Chester said.
ASIC is conducting a separate investigation on another lending model which involves related entities of Cigno and BHF Solutions, namely Cigno Australia Pty Ltd and BSF Solutions Pty Ltd.
