‘Greed and Evil’ Payday Lender Cigno Continues With ASIC

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

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

Platt admits, “It was approved on the spot. I didn’t really look into the nitty-gritty.”

Not long after she got her first loan from Cigno, she successfully applied for the $200, because she thought she had paid off her original debt.

Little did Platt realize, however, that her $300 loan had also incurred a high account-keeping fee.

She struggled to pay off the loans and two years later, after taking a hit with savings and late fees, ended up paying Cigno $2,600, of which she still owes $32.

“[I am] Completely confused and exhausted because I already paid the money.”

legal loopholes

Consumer advocates say Platt is one of many Cigno customers who have found themselves in a debt spiral after signing up for a loan with a 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 lending model does more harm than any other form of credit,” says Tom Aburezek, director of policy at the Consumer Law Center on Consumer Law.

Tom Aburezek, policy officer with the Center for Consumer Action Law, says the federal government must act urgently to modernize credit laws.(ABC News: Simon Tucci )

ASIC’s entrepreneur has been at a cat-and-mouse game with Cigno for years.

The company circumvents credit laws by using exemptions in the National Credit Act.

“It is the shark-lending activity and it is desperate that it should be stopped as soon as possible,” says Abu Rizk.

Buy now, pay later for businesses, prepaid products are currently exempt from credit laws.

On July 15, ASIC used its special powers to intervene to ban lending models for short-term and continuous credit used by Cigno and its associated lending entity BHF Solutions.

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

It came after ASIC won its full federal court appeal against Cigno and BHF Solutions last month, in a decision that sided with the regulator’s position that the companies were offering some form of credit obtained by the National Credit Act due to the amount of fees they charged.

It overturned a Federal Court decision in June 2021.

The judgment included an example of a woman who, assuming she made her payments on time, was expected to pay $177.75 in fees for a $200 loan and $231.80 in fees for a $300 loan.

On Monday, Cigno and BHF Solutions filed an application for leave to the Supreme Court to appeal the federal court’s decision. The Supreme Court will need to consider whether or not to hear the appeal.

Meanwhile, Cigno still offers loans on its website with fees slightly lower than those indicated in the federal court ruling.

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

Loans between $50 and $1000 attract a Cigno fee for maintaining an account of $129.90. Customers also face a $15 changeover fee, a $79 insult fee, and a $20 lender default fine.

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

An ASIC spokeswoman said the regulator is investigating whether the form is legal.

“ASIC understands that Cigno (Cigno Australia Pty Ltd) continues to provide loan arranging services on its website. ASIC is looking into the lending product and model including whether conduct violates the product’s interventions orders,” an ASIC spokeswoman said.

If so, it would be the third time Cigno has created a new lending model to get around ASIC bans and credit laws.

“It appears that Cigno’s website is still operating as usual,” Abu Rezeq notes.

“This means that people can still be exposed to the same excess fees they have charged on the loans they have arranged so far.”

Small loans make big profits

The amount of money Cigno makes on its loans is far from simple change.

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

Cigno describes itself as an “agent to help you get a loan from lenders” rather than being a lender per se.

BHF Solutions describes itself as “Australia’s leading expert in business and financial advisory”.

ABC contacted Cigno, BHF Solutions and the offices of attorneys working on behalf of the two companies but did not receive a response by the publication deadline.

Australia’s chief financial advisor Fiona Guthrie argues that the federal government must act urgently to modernize Australia’s credit laws.

“Once regulators try to plug a loophole in the law, they find another,” she says.

Fiona Guthrie wears a black jacket over a white shirt.
Fiona Guthrie of Financial Counselling Australia says Cigno is a predatory lender.(News letters)

Depending on the outcome of court proceedings, CALC will encourage ASIC to look for ways to compensate Cigno’s clients, Abourezek says.

“If there is any scope for a reform or offset project, they should definitely examine that,” he explains.

“Our concern is that they might find the vaults bare if you get to that point with Cigno, as other predatory lenders like this have done in the past.”

predatory company

Guthrie says the Cigno model targets vulnerable people.

“Financial advisors will describe it as a predatory company,” she said.

Ms Guthrie hopes the Supreme Court will deny BHF Solutions and Cigno’s request to hear her appeal.

“We can’t have companies like this operating in the Australian market, it’s too dangerous,” she argues.

“There are costs to the wider community because we end up with people who are financially and mentally stressed. They end up in the hospital and they end up in the food relief services.”

“Obviously it is credit. It is a model that has been avoided for credit lending. There is no legal reason to go forward.”

Platt says she is struggling to pay the fees added to her loan amount which means she has had to cut back on necessities like groceries.

“They’re cold-hearted, greedy, and evil,” Platt says. “They’re terrible.”

“I would never recommend them.”

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