Greedy and angry payday loan lender Cigno plays cat and mouse with ASIC continues
Laura Platt was desperate for money to get her car repaired when she saw a Cigno ad featuring “quick cash loans up to $ 1,000”.
- ASIC has banned loans offered by Cigno, but the company appears to have introduced a new lending model
- Cigno made $ 60 million in fees in five and a half months, according to court papers
- Consumer ombudsmen say national credit laws need to be updated to close the loopholes
Mrs. Platt uploaded her bank statement to the Cigno website, and a few hours later, $ 300 landed on her bank account.
“It was approved right away. And I didn’t really deal with the small details, ”admits Platt.
Shortly after receiving her first loan with Cigno, she successfully applied for $ 200 as she thought she had paid off her original debt.
However, what Ms. Platt did not realize was that her $ 300 loan also incurred high account fees.
She struggled to pay off her loans, and two years later, after being forced to maintain an account and overdue fees, paid Cigno $ 2,600, of which she still owes $ 32.
“[I am] completely confused and stressed because I already paid my money – he says.
Consumer advocates say Ms Platt is one of many Cigno customers who found themselves in a debt spiral after taking out a loan from a Gold Coast company.
On its website, Cigno advertises products such as “Centrelink Loans No Credit Checks“, “Centrelink Loans With Bad Credit”, “Centrelink Loans For Customers” and “Online Loans For Centrelink Customers”.
“This lending model causes more damage than any other form of credit,” said Tom Abourizk, policy director of the Consumer Acton Law Center.
The corporate ASIC controller has been playing cat and mouse with Cigno for years.
The company circumvents credit regulations by taking advantage of exceptions in the national credit code.
“It’s the loan shark business, and it’s desperate to stop it as soon as possible,” says Abourizk.
Buy Now, Pay Later Advance companies and products are now exempt from credit regulations.
On July 15, ASIC used its special intervention powers to ban the short-term and continuous lending models used by Cigno and its related loan entity BHF Solutions.
ASIC has already banned one of these lending models in another intervention, but that order expired in 2021.
This came after ASIC won last month in an appeal to the Full Federal Court against Cigno and BHF Solutions, in a decision that backed the regulator’s position that companies were offering a form of credit covered by the National Credit Code due to the amount of fees charged. .
He overturned the decision of the Federal Court in June 2021.
The verdict included the example of a woman who, assuming she made the payment on time, was to pay $ 177.75 in loan fees of $ 200 and $ 231.80 in loan fees of $ 300.
On Monday, Cigno and BHF Solutions applied for permission to appeal the decision of the Federal Court to the Supreme Court. The High Court will need to consider whether to hear the appeal.
Meanwhile, Cigno continues to offer loans on its website with fees that are slightly lower than what is stipulated in the Federal Court ruling.
According to the Cigno website, customers have to pay the lender’s costs and Cigno’s service fees.
Loans ranging from $ 50 to $ 1,000 will incur a Cigno account maintenance fee of $ 129.90. Customers also incur fees of $ 15 for a payment modification, a disregard fee of $ 79, and a lender default penalty of $ 20.
The website also states that the cost “varies with the loan and payment options selected”.
An ASIC spokeswoman said the regulator was investigating whether the model was legal.
“ASIC realizes that Cigno (Cigno Australia Pty Ltd) continues to offer loan arrangement services on its website. ASIC is looking at the product and credit model, including whether behavior is inconsistent with product intervention orders, an ASIC spokeswoman said.
If so, this would be the third time Cigno has created a new credit model to circumvent ASIC’s prohibitions and credit regulations.
“Cigno’s website looks like it’s still working as usual,” Abourizk notes.
“This means that people can still be harassed with the same excessive fees they have been charging on loans that they have arranged so far.”
Small loans generate big profits
The amount Cigno has earned in loans is by no means small.
The company’s full financial history is not public, but Federal Court documents show that over a five-and-a-half month period, Cigno made 166,045 loans totaling more than $ 46 million, and the total amount charged (in addition to the principal) for these loans was more than $ 61 million.
Cigno describes himself as “an agent to help you get a loan from your lenders” and not as the lender itself.
BHF Solutions describes itself as “Australia’s leading expert in business and financial advisory”.
ABC has contacted Cigno, BHF Solutions and the solicitor’s offices on behalf of both companies, but received no reply by the publication date.
Fiona Guthrie, chief executive of Financial Counseling Australia, says the federal government urgently needs to take action to update Australia’s credit laws.
“As soon as regulators try to close one hole in the law, they find another,” he says.
Mr. Abourizk says that depending on the outcome of the legal proceedings, CALC will encourage ASIC to look at compensation options for Cigno’s clients.
“If there is any remedial or compensation project, they should absolutely investigate it,” he explains.
“Our concern is that they may discover that the cabinets are empty if it comes to this point in Cigno, like other predatory lenders like this one in the past.”
Ms Guthrie says the Cigno model is aimed at sensitive people.
“Financial advisers would describe them as a predatory company,” she said.
Ms Guthrie hopes the Supreme Court will dismiss BHF Solutions and Cigno’s request to hear the appeal.
“We cannot have such companies operating on the Australian market, it is so dangerous,” he argues.
“There are costs to the wider community because we end up with people under financial and mental stress. They end up in the hospital and end up at the food aid station. “
“It’s quite clearly a credit. This is a model that has been avoided. And there is no legal reason to do so. “
Ms Platt says her efforts to pay off the fees added to her loan amount meant she had to cut back on essentials like groceries.
“They are cold-hearted, greedy and angry. They are terrible, ”says Platt.
“I would never recommend them.”