Two Queensland companies have failed to overturn the financial regulator's injunction for illegally offering expensive short-term loans to thousands of people a week.
In September 2020, the Australian Securities and Investments Commission sought injunctions against Cigno Pty Ltd and BHF Solutions Pty Ltd for using a business model that claimed to employ a legal exemption to lend money without an Australian credit licence.
According to ASIC records, both companies are based on the Gold Coast with Cigno registered in Southport and BHF Solutions in Surfers Paradise.
ASIC claimed BHF Solutions would provide the credit and charge a fee to borrowers while Cigno separately charged high fees to the same clients for arranging and managing the credit.
The financial regulator said the combined fees charged to the borrowers exceeded the prescribed maximum charge allowed in order to be exempt from holding a credit licence.
Neither Cigno nor BHF Solutions holds, or has ever held, an Australian credit licence.
In its original statement of claim, ASIC said the two companies had about 30,000 to 40,000 active clients using their short-term loans with multiple fees as of June 2020 and had been acquiring 5000 new clients a week in September 2019.
Cigno advertised its loans online as providing "emergency cash when you need it" for veterinary costs, medical bills or Centrelink repayments via a short application process with high approval rates and transactions approved 24/7 including on weekends.
ASIC referred to the instance of a woman borrowing $200 from Cigno and BHF Solutions in October 2019 only to find that the two companies charged her three types of fees that added $177.75 to the debt within 28 days.
The woman was later charged $471.30 in fees by the two companies to borrow $300 over a period of less than four months.
The Federal Court calculated that the fees charged by Cigno and BHF Solutions for loans over a 62-day period were equivalent to 800 per cent annual interest.
Cigno and BHF Solutions argued that woman was charged fees in exchange for providing the services pursuant to her agreement with the company and not for the provision of credit.
In June 2021, the Federal Court dismissed ASIC's application, finding BHF Solutions and Cigno did not contravene the National Credit Act.
ASIC successfully appealed that decision in the full Federal Court in July and BHF Solutions and Cigno subsequently took the matter to the High Court.
The High Court on Thursday denied the two companies special leave to appeal the Federal Court's decision in favour of ASIC.
