The “greedy and evil” payday lender Cigno’s cat-and-mouse game with ASIC continues

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Laura Platt was in dire need of money to fix her car when she saw an ad for Cigno touting “quick cash advances of up to $1,000.”

Ms. Platt uploaded a bank statement to Cigno’s website, and a few hours later, $300 landed in her bank account.

“It was approved immediately. And I wasn’t really paying attention to the fine details,” Ms. Platt said.

Shortly after getting her first loan from Cigno, she successfully applied for $200, thinking she had paid off her original debt.

However, Ms. Platt was unaware that her $300 loan had also incurred high maintenance fees.

She is struggling to pay back the loans. Two years later, after being hit with maintenance and late fees, she paid Cigno $2,600, of which she still owes $32.

“[I am] totally confused and stressed out because I’ve already paid off the money,” she said.

loopholes

Consumer advocates say Ms Platt is one of many Cigno customers who have found themselves spiraling into debt after taking out a loan from the Gold Coast-based company.

On its website, Cigno advertises products such as “Centrelink loans without credit check”, “Centrelink loans with bad credit”, “Payday loans for Centrelink customers” and “Online loans for Centrelink customers”.

“This credit model does more damage than any other form of credit,” said Tom Abourizk, policy director at the Consumer Acton Law Centre.

Consumer Action Law Center policy officer Tom Abourizk says the federal government must act urgently to update credit laws.(ABC News: Simon Tucci )

Business regulator ASIC has been in a cat-and-mouse game with Cigno for years.

The company circumvents credit laws by using exceptions in the National Credit Code.

“It is loan shark activity and it is desperate that it must be stopped as soon as possible,” Mr Abourizk said.

Buy now, pay later businesses and wage advance products are also currently exempt from the credit laws.

On July 15, ASIC used its special powers of intervention to ban the lending models used by Cigno and its affiliated lending company BHF Solutions for short-term and continuous lending.

ASIC had already banned one of these credit models in another intervention order, but that order expired in 2021.

It came after ASIC won its appeal in Full Federal Court last month against Cigno and BHF Solutions in a ruling that sided with the regulator that the companies offer a form of credit that is exempt from the National Credit Code because of the amount is recorded by fees they charged.

It overturned a decision of the Federal Supreme Court from June 2021.

The ruling included the example of a woman who was expected to pay $177.75 in fees on a $200 loan and $231.80 in fees on a $300 loan provided she made her payments payments on time.

On Monday, Cigno and BHF Solutions filed a motion in the High Court seeking leave to appeal the Federal Court’s decision. The High Court must consider whether or not to accept the appeal.

Meanwhile, Cigno still offers loans on its website with fees slightly lower than those mentioned in the Federal Court’s ruling.

According to Cigno’s website, customers must pay the lender’s costs and Cigno’s service fees.

The company says a typical $300 loan “might look like this”: A $129.90 Cigno maintenance fee and additional $15 fees for amending repayments, a $79 dishonesty fee, and a lender default penalty of $20.

The site also states that costs “will vary depending on the loan and payment options you choose.”

A spokeswoman for ASIC said the regulator is investigating whether the model is legal.

“ASIC is aware that Cigno (Cigno Australia Pty Ltd) continues to provide credit brokerage services on its website. ASIC is reviewing the credit product and model, including whether the conduct violates the Product Intervention Orders,” said a spokeswoman for ASIC said.

If so, it would be the third time Cigno has devised a new lending model to circumvent ASIC’s prohibitions and lending laws.

“From Cigno’s website, it looks like everything is going on as usual,” Mr. Abourizk said.

“It means people can still be hit with the same inflated fees they used to charge for the loans they’ve arranged so far.”

Small loans bring big profits

The amount of money Cigno has made from his loans is anything but small change.

The company’s full financial history is not public, but federal court documents show that over a five-and-a-half month period, Cigno arranged 166,045 loans totaling over $46 million and the total amount in fees (in addition to principal) for these loans was more than 61 million US dollars.

Cigno describes itself as an “agent who helps you get a loan from lenders” rather than a lender himself.

BHF Solutions describes itself as “Australia’s Leading Experts in Management Advice and Financial Advice”.

The ABC has contacted Cigno, BHF Solutions and the law firms acting on behalf of the two companies, but received no response as of the publication date.

Financial Counseling Australia chief executive Fiona Guthrie said the federal government needed to act urgently to update Australia’s credit laws.

“Once regulators try to fill one loophole in the law, they find another,” she said.

Fiona Guthrie wears a black jacket over a white top.
Financial Counseling Australia’s Fiona Guthrie says Cigno is a predatory lender.(abc news)

Mr. Abourizk said depending on the outcome of the court case, CALC would encourage ASIC to explore ways to compensate Cigno’s customers.

“If there is scope for a remediation or compensation project, they should definitely look into that,” he said.

“Our concern is that if Cigno goes as far as other predatory lenders like this one have done in the past, they might find that the cupboards are empty.”

“Predator Society”

Ms Guthrie said Cignos’ model is targeting vulnerable people.

“Financial advisors would call them robbery companies,” she said.

Ms Guthrie hopes the High Court will dismiss BHF Solutions and Cigno’s application for appeal.

“We can’t let companies like this operate in the Australian market, it’s so dangerous,” she said.

“There are costs to the wider community because we have people in financial and psychological distress. You end up in the hospital and you end up with food relief services.”

“It’s pretty clearly a loan. It is an avoided lending model. And there is no legal reason why it should continue.”

Ms Platt said her struggle to repay the fees added to her loan amount meant she was forced to cut back on essentials like groceries.

“They are cold-hearted and greedy and evil. They’re terrible,” Ms Platt said.

“I would never recommend her.”

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