The Australian Securities and Investments Commission (ASIC) has successfully defended a Full Federal Court appeal brought by Cigno Australia and BSF Solutions, along with their directors Mark Swanepoel and Brenton Harrison.
The Full Court unanimously dismissed the appeal, upholding the Federal Court’s May 2024 ruling that the companies engaged in unlicensed credit activity and charged prohibited fees through their “No Upfront Charge Loan Model.”
The judgment confirms that both companies operated without an Australian credit licence and were in breach of the National Consumer Credit Protection Act.
The court held there was “no error by the primary judge in concluding that Cigno and BSF established and implemented, for their joint benefit, a shared business model, namely the No Upfront Charge Loan Model.”
ASIC chair Joe Longo (pictured) welcomed the outcome, stating it reinforces ASIC’s commitment to stopping unlawful lending practices that exploit vulnerable consumers.
“We are pleased the Full Court has confirmed the decision that Cigno Australia and BSF Solutions and its directors engaged in Credit Act breaches through its ‘No Upfront Charge Loan Model’,” Longo said in a media release.
“ASIC considers that the model was designed to avoid consumer protection laws and to allow the charging of significant fees to consumers, many of whom were vulnerable and in financial distress.”
Between July 2022 and December 2022, Cigno and BSF provided $34 million in loans to over 100,000 Australians, using the now-unlawful model.
“Through this model, consumers were charged substantial fees of over $70 million,” Longo said.
The court also reaffirmed that the “account keeping fee” and “change of payment schedule fee” charged to consumers by Cigno constituted charges for the provision of credit, regardless of how they were contractually framed.
The judges found that these fees were “imposed on account of, or by reason of, the provision of credit” by BSF, as a matter of “practical commercial substance.”
This aligned with the earlier Federal Court conclusion that both Cigno and BSF were engaged in unlicensed credit activity in breach of sections 29(1) and 32(1) of the National Consumer Credit Protection Act 2009.
The Full Court also found that the directors, Mark Swanepoel and Brenton Harrison, had actual knowledge of the essential facts underpinning the breaches, confirming their accessorial liability.
The Full Court also ordered that Cigno Australia, BSF Solutions, and their directors pay ASIC’s costs of the appeal. The matter will return to the Federal Court before Justice Jackman for a penalty hearing on a date to be set.
“Consumer protection and taking action against and stopping harmful lending is an enduring ASIC priority,” Longo said.
ASIC originally launched civil proceedings in October 2023, alleging that Cigno Australia and BSF Solutions had provided credit without a licence. In May 2024, the Federal Court ruled in ASIC’s favour, prompting the unsuccessful appeal.
The regulator has previously taken similar enforcement actions against Cigno and BHF Solutions, who operated a different loan model (the “Continuing Credit Model”) found to be unlawful in a June 2022 Full Federal Court decision.
