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An Appeal to prevent consumer harm

Tuesday 28 June 2022

 

The lending model used by BHF solutions and Cigno does not substantively stack up in the eyes of the Federal Court a second time around. 

The full federal court decision  finds , just a little more year on since the case brought by the Australian Securities and Investments Commission (ASIC) was dismissed, that the combined fees of BHF and the Cigno is more than maximum charge that allows an exemption from holding a credit licence. 

ASIC Commissioner Sean Hughes said in an official statement, “ASIC expects companies to be candid about their credit arrangements. Credit regulation exists to protect consumers from unscrupulous and unfair lending practices and companies should not seek to bypass important consumer protections through artificial structures and mechanisms which expose consumers to additional harm and avoidable cost.”
 
The Initial Dismissal
ASIC commenced initial proceedings against the credit provider and arranger in 2020 alleging there had been a breach of the National Consumer Credit Protection Act 2009. 

 When the Federal Court dismissed the case last June, ASIC commissioner Sarah Court said in official statement, “ASIC took this case in order to protect vulnerable consumers from what we believed to be a harmful lending model.”
 
This is a model had been used before under short term credit act, and the in 2019 the securities and investments regulator made an ‘industry-wide product intervention’, but the product intervention order lapsed in March 2021. 

The ASIC commissioner Court  said at the time, “ASIC will carefully consider the judgment before deciding on our response.”
 
Preventing Consumer Harm
In the context of ASIC’s successful appeal, Hughes said, “ASIC took on this case and appealed the Federal Court decision because we were concerned that vulnerable consumers were being charged significant fees which gave rise to hardship, and they were not afforded the consumer protections provided by the National Credit Act and Code.”