Today’s Federal Court decision that the lending model promoted by Cigno Pty Ltd did not breach the National Consumer Credit Protection Act (National Credit Act) is extremely disappointing, and consumer advocates have urged the Australian Securities and Investments Commission (ASIC) to appeal the decision.
Over recent years, community lawyers and financial counsellors have been inundated with complaints about this lending model which results in people being signed up to contracts with fees costing upwards of 1,000 percent of the original loan application.
“ASIC did the right thing to initiate this legal action. Businesses who engage in credit activities need to be licensed and subject to charging limits, but tricky business models like this take steps to evade the law”, said Karen Cox, CEO of Financial Rights Legal Centre.
“This judgment appears to have taken a very narrow interpretation to the National Credit Act, finding that Cigno’s charges were not in connection with the provision of credit but for ‘application, management and collection services’, and that the associated lender only charged a $15 fee”, said Gerard Brody, CEO of Consumer Action Law Centre
“Justice Halley admits that the law as he applied it, following similar court decisions, ‘produces a result that could not have been intended’. We think ASIC should appeal this decision so that a superior court can examine the correct application of the credit legislation”.
ASIC has previously made a product intervention order in relation to Cigno Pty Ltd, and has consulted on a further product intervention order after it changed its business model.
“We also think ASIC should revisit its product intervention order so as to stamp out exploitative and predatory business models that cause substantial consumer detriment”, said Fiona Guthrie, CEO of Financial Counselling Australia.
Financial Counselling Australia: [email protected]
Consumer Action Law Centre: Mark Pearce, Media and Communications Adviser, 0413 299 567, [email protected]