ASIC has been successful in its action against Cigno Pty Ltd (Cigno) and BHF Solutions Pty Ltd (BHF Solutions), with the Federal Court finding that both companies engaged in credit activities without holding an Australian credit licence. ASIC also obtained permanent injunctions against Cigno and BHF Solutions to protect consumers.

The decision follows a series of appeals during the litigation, including an unsuccessful bid by Cigno and BHF Solutions to seek special leave in the High Court in December 2022 (22-360MR).

ASIC Deputy Chair Karen Chester welcomed the decision, saying, ‘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. 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.’

At the time ASIC commenced proceedings in 2020, BHF Solutions was writing more than 1,000 loans each day. ASIC took the matter to Court with the primary objective of stopping BHF Solutions and Cigno from using this harmful lending model. ASIC is committed to protecting consumers from predatory lending practices and high-cost credit.

In the consumer example described by ASIC in the case, a borrower with a $200 loan repaid in 2 months ended up paying $177.75 in fees to BHF Solutions and Cigno. The same borrower went on to borrow a further $600, ultimately paying another $703 in fees.

Justice Halley found that the objective purpose of the particular lending model established by BHF Solutions and Cigno was to avoid the provisions of the National Credit Act and National Credit Code which provide for the protection of consumers from disproportionate fees and charges.

The injunctions prevent Cigno and BHF Solutions from operating this particular lending model or collecting repayments and fees from consumers on loans provided under this particular model.

Separately ASIC is investigating another lending model involving Cigno Australia Pty Ltd and BSF Solutions Pty Ltd, which are related entities of Cigno and BHF Solutions.