The Full Federal Court has recently dismissed an appeal by Cigno Pty Ltd (Cigno) aimed to overturn ASIC’s first-ever Product Intervention Order (PIO). The PIO prohibited certain short-term credit products.
It is the first consideration by an appellate court of the new product intervention power. The decision is important for ASIC’s more muscular, interventionist approach demonstrated in PIOs over products that it believes may cause consumer harm, such as this short-term credit product as well as OTC derivatives which were the subject of our earlier article. It also provides important guidance to lawyers (like us) on how appeals of the new power should be framed and brought.
Cigno’s appeal was against an earlier judgment in the Federal Court, which rejected Cigno’s application for judicial review of ASIC’s PIO. Cigno’s case alleged ASIC made legal errors in both the interpretation as well as application of its powers.
ASIC’s first-ever PIO, issued on 12 September 2019, aimed to quash a product which comprised:
- A credit provider (in this case Gold-Silver Standard Finance Pty Ltd) providing small amounts of up to $1,000 in credit to a consumer, for a fee; and
- An associate (Cigno) providing collateral management services to the consumer, again for a fee.
The Full Court found that ASIC, in assessing the consumer harm of a particular product, is permitted to consider the circumstances in which the product is applied, along with the product’s inherent characteristics. Had the Court found otherwise, ASIC would not have been entitled to look at the costs and other terms of the services provided by Cigno.
We consider that this judgment will further encourage ASIC in its already bold pursuit of product intervention, as it aims to prevent consumer detriment wherever possible.
If you need advice on how any ASIC product intervention order or other regulatory action might impact your business or clients, the financial services regulatory experts at Mackay Chapman are here to help.
Further information can be found in ASIC’s media release on the judgment: https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-151mr-full-federal-court-upholds-first-asic-product-intervention-order/
The judgment can be found here: https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2021/2021fcafc0115