Laura Platt was in desperate need of money to repair her car when she saw an advertisement for Cigno, which offered “quick cash loans of up to $1,000”.
- ASIC has banned the types of loans offered by Cigno, but the company appears to have implemented a new loan model
- Cigno made $60 million in fees in five and a half months, court documents show
- Consumer advocates say national credit laws need updating to close loopholes
Ms. Platt downloaded a bank statement from the Cigno website and a few hours later $300 landed in her bank account.
“It was approved, right away. And I didn’t really look into the details,” Ms. Platt said.
Shortly after getting her first loan from Cigno, she successfully applied for $200, as she thought she had paid off her original debt.
However, Mrs. Platt did not realize that her $300 loan had also resulted in high account maintenance fees.
She has trouble repaying the loans. Two years later, after being hit with maintenance and late fees, she ended up paying Cigno $2,600, of which she still owes $32.
“[I am] completely confused and stressed because I already paid the money,” she said.
Consumer advocates say Ms Platt is one of many Cigno customers who found themselves spiraling into debt after taking out a loan from the Gold Coast-based company.
On its website, Cigno advertises products such as “Centrelink loans without credit check“, “Bad Credit Centrelink loans”, “Payday loans for Centrelink customers” and “Online loans for Centrelink customers”.
“This lending model causes more harm than any other form of credit,” said Tom Abourizk, director of policy at the Consumer Acton Law Center.
Corporate regulator ASIC has been playing cat and mouse with Cigno for years.
The company circumvents credit laws by using exemptions from the National Credit Code.
“It is loan shark activity, and it is desperate that it must be stopped as soon as possible,” Mr Abourizk said.
Buy now, pay later companies and payday advance products are also currently exempt from credit laws.
On July 15, ASIC used its special powers of intervention to ban the short-term and continuous credit lending models used by Cigno and its associated lending entity BHF Solutions.
ASIC previously banned one of these loan models in another action order, but that order expired in 2021.
It came after ASIC won an appeal to the full Federal Court against Cigno and BHF Solutions last month, in a decision that sided with the regulator’s position that the companies were offering a form of credit captured by the National Credit Code because of the amount of fees they charge.
It overturned a Federal Court decision in June 2021.
The judgment included the example of a woman who, assuming she made her payments on time, had 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 for High Court leave to appeal the Federal Court’s decision. The High Court will have to decide whether or not to hear the appeal.
Meanwhile, Cigno is still offering loans on its website with slightly lower fees than those referenced in the Federal Court judgment.
According to Cigno’s website, customers must pay the lender’s fees and Cigno’s service fees.
Loans between $50 and $1,000 incur a Cigno account maintenance fee of $129.90. Customers also face a $15 fee for changing repayments, a $79 refusal fee, and a $20 loan default penalty.
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 the legality of the pattern.
“ASIC is aware that Cigno (Cigno Australia Pty Ltd) continues to offer services for arranging loans on its website. ASIC reviews the product and loan model, including whether the conduct violates product intervention orders,” an ASIC spokeswoman said. said.
If so, it would be the third time Cigno has created a new loan model to circumvent ASIC bans and credit laws.
“Cigno’s website still appears to be operating as usual,” Abourizk said.
“That means people can still be ripped off with the same excessive fees they’ve charged on loans they’ve taken out to date.”
Small loans generate big profits
The amount of money Cigno has made from his loans is far from a small change.
The company’s full financial history is not public, but federal court documents show that in five and a half months, Cigno took out 166,045 loans totaling more than $46 million, and the total amount billed in fees (plus principal) for these loans was over $61 million.
Cigno describes itself as an “agent to help you get a loan from lenders” rather than a lender itself.
BHF Solutions describes itself as “Australia’s leading expert in business advisory and financial advice”.
The ABC contacted Cigno, BHF Solutions and the law firms acting on behalf of the two companies but did not hear back by the publication deadline.
Financial Counseling Australia chief executive Fiona Guthrie said the federal government must act urgently to update Australia’s credit laws.
“As soon as regulators try to fill one hole in the law, they find another,” she said.
Mr. Abourizk said that depending on the outcome of the legal proceedings, CALC would encourage ASIC to seek ways to compensate Cigno customers.
“If there is a possibility for a remediation or offset project, they should definitely look into it,” he said.
“Our concern is that they might find the cupboards empty if it gets to this point with Cigno, as other predatory lenders like this have in the past.”
Ms Guthrie said Cigno’s model targeted vulnerable people.
“Financial advisers would describe them as a predatory company,” she said.
Ms Guthrie hopes the High Court will reject BHF Solutions and Cigno’s request to hear her appeal.
“We can’t have companies like this operating in the Australian market, it’s so dangerous,” she said.
“There are costs to the wider community because we end up with people under financial and mental stress. They end up in hospital and they end up in food relief services.”
“It’s pretty clearly credit. It’s an avoided credit lending model. And there’s no legal reason for it to continue.”
Ms Platt said her struggle to repay fees added to her loan amount meant she was forced to cut back on essentials such as groceries.
“They’re cold-hearted, greedy and mean. They’re horrible,” Ms Platt said.
“I would never recommend them.”