The Cigno Saga Continues with Fresh Civil Penalty Proceedings against BSF and Cigno Australia and its Directors

ASIC has taken further civil penalty action against BSF Solutions Pty Ltd (BSF)and Cigno Australia Pty (Cigno Australia), together with their Directors Brenton James Harrison and Mark Swanepoel, for allegedly providing credit without a license. It is the latest instalment in a long running and hard fought battle between the Regulator and the respondents (or their associated entities).

The Key Takeaways:

• The action fits squarely within its Enforcement Priorities, specifically targeting high-cost credit targeting vulnerable consumers.
  ‍
• Some consumers in the present case were allegedly charged fees of more than 600% of their total loan amount.
  ‍
• ASIC has broadened its approach in this action, not just targeting corporate entities but also suing the Directors Mr Harrison and Mr Swanepoel. It appears to be in response to the Directors’ connection with similar contravention/s where ASIC successfully obtained judgment earlier this year. See our earlier article about this judgment here.

The Recent Action

It is alleged that Cigno Australia and BSF operated a ‘No Upfront Charge Loan Model’, where:

• BSF would lend the consumer the loan amount and charge essentially no interest or fees; and
  ‍
• Cigno Australia charged an exorbitant amount of fees in the name of an “Account Keeping Fee”, “Default Fee” and a “Change of Payment Schedule Fee”.

ASIC alleges that BSF provided over $34 million in loans, while BSF and Cigno Australia charged over $70 million in fees, with some affected consumers were charged fees of more than 600% of their total loan amount.

ASIC’s Deputy Chair Sarah Court explains that this matter was brought to Court to stop a harmful lending model and to protect consumers from excessive fees and charges. This appears part of ASIC’s efforts to double down with one of its 2023 enforcement priorities, namely protecting financially vulnerable consumers from predatory lending practices or high-cost credit including conduct by unlicensed or 'fringe' entities (we covered the 2023 Enforcement Priorities here).

This proceeding has been commenced less than 3 months after ASIC successfully obtained injunctions in a civil action against similarly named and related entities, BHF Solutions Pty Ltd (BHF) and Cigno Pty Ltd (Cigno), of which Mr Harrison and Mr Swanepoel were also Directors.

ASIC has specifically noted the earlier proceeding against BHF and Cigno in its concise statement against BSF and Cigno Australia.  The Concise Statement notes that the No Upfront Charge Loan Model was implemented from July 2022, shortly after ASIC was successful in its appeal against BHF and Cigno.  It appears ASIC will be seeking to rely on the implied connection between these events in the present action, potentially in relation to the relief sought against the Directors personally.

Unlike the previous civil penalty proceeding commenced in 2020 against BHF and Cigno, which only sought declarations and injunctions against the entities themselves, ASIC is now pursuing declarations, pecuniary penalties, adverse publicity orders and injunctions against Cigno Australia and BSF, and seeking declarations, pecuniary penalties and injunctions against Mr Harrison and Mr Swanepoel.

This action is the latest in a concerted effort by ASIC to curtail the activities of the respondents and what it sees as potential harmful, marginal lending practices.  Based on the responses of Cigno and BHF to the earlier action, including the new businesses and model, it could be a long and hard fought action.

ASIC's media release is below.
https://asic.gov.au/about-asic/news-centre/find-a-media-release/2023-releases/23-266mr-asic-sues-cigno-australia-bsf-solutions-and-their-directors-alleging-unlicensed-credit-activity/

The Originating Process and Concise Statement is below.
https://download.asic.gov.au/media/5kimvgoj/23-266mr-originating-application-sealed-3-october-2023.pdf

https://download.asic.gov.au/media/d2dpgvt3/23-266mr-concise-statement-sealed-3-october-2023.pdf‍

‍

The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such.  It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only.  You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.