ASIC successful in High Court against Cigno appeal

Cigno Pty Ltd and BHF Solutions Pty Ltd sought to appeal the decision of the Full Federal Court which unanimously found that a ‘financial supply fee’ charged by Cigno was a charge ‘made for providing credit’.

The financial services regulator succeeded in its appeal before the Full Federal Court in June 2022, which led to Cigno and BHF Solutions seeking special leave.

The High Court dismissed the special leave applications on Thursday (15 December).

Australian Securities and Investment Commission (ASIC) found the short-term lender Cigno and BHF Solutions operated a lending model that relied on an exemption in the National Credit Code that claimed it did not require an Australian credit licence.

Neither BHF Solutions nor Cigno holds, or has ever held, an Australian credit licence.

The lender, BHF Solutions, provided the credit and charged a fee under the credit contract to consumers. While Cigno, under a composite services agreement, separately charged very high fees (including the “financial supply fee”) to arrange and manage the credit.

However, the court previously found these fees, combined with the lender’s fees, “exceeded the prescribed maximum charge allowed” in order to be exempt from holding a credit licence.

The Federal Court found the “financial supply fee” charged by Cigno was a charge “made for providing credit”.

 ASIC commenced proceedings against Cigno and BHF Solutions in September 2020 seeking declarations of contravention and injunctions.

ASIC’s case had included three case studies of consumers who had borrowed from BHFS under the agreement with Cigno. One was Leah Morrow, had entered into a credit contract with BHFS through Cigno around 18 October 2019, with ASIC referring to three separate drawdowns of loans advanced by the company to her between October 2019 and August 2020.

ASIC had argued that Ms Morrow could not receive the loans from BHFS unless she paid an excessive amount in fees, listing a financial supply fee, account keeping fee and the change of payment schedule fee. Cigno on the other hand, had contended that its services charges were an “essential quid pro quo for the provision of the credit”.

The judgement noted there was no allegation that the services charged for and supplied by Cigno were not genuine services.

[Related: Court dismisses ASIC case against short term lenders]