Grace* says any time she hears the name Cigno, her jaw clenches. In 2022, while living on jobseeker, the then single mother took on a $250 loan with the payday lender so she could afford groceries. Three weeks later, when her first payment of $54 was direct debited, the loan had already blown out to $514.50 with fees added.
“I’d be down to my last $60 and I’d suddenly find it was gone because they’d direct debited it out of my account,” she says.
Consumer groups allege Cigno, headed by the former super rugby player Mark Swanepoel, has targeted some of the poorest Australians with its promise of “quick”, “easy” and “hassle-free” cash. Instead, many say they have been dragged into unsustainable debt due to the high-fee loans.
In May, the federal court ruled that the type of loan issued to Grace – and more than 100,000 others, who were collectively charged over $70m in fees – had contravened the National Credit Act by issuing loans without a credit licence and charging prohibited fees. The court ordered the business to no longer collect on the loans in response to a lawsuit from the Australian Securities and Investment Commission.
But this is not the first time Cigno, and its associated lender, BSF Solutions, have been found to have issued loans unlawfully, and some fear that the court’s latest action won’t be enough to stop Cigno targeting vulnerable people again.
‘Whack-a-mole’
The federal court found Cigno and BSF Solutions had issued loans between July 2022 and December 2022 under its “no upfront charge loan model” and that this violated the credit act by issuing and collecting debts on loans without a credit licence.
This was Asic’s latest in a series of attempts to crack down on Cigno that stretch back to 2019.
Each time Asic took action, the business would find new exemptions in the act that allow loans to be issued without a credit licence under certain conditions. Then it proceeded to charge the consumers exorbitant fees beyond what was allowed.
In 2019, Asic issued a “product intervention order”, a short-term ban on a type of lending model being used by Cigno and an associated lender since 2014. It was the first time the regulator had used this power.
The same year, Cigno and the then new lender, BSF Solutions, started issuing loans under a different model.
When the regulator’s successful lawsuit was launched in 2020, it said BSF Solutions was issuing more than 1,000 loans a day.
Two years later, with the lawsuit still afoot, Asic issued another “product intervention” aimed at companies including Cigno. In January, the ban was extended to 2032.
In the meantime Cigno and BSF Solutions changed tack again and began offering the so-called “no upfront charges loan model”, which was the subject of the most recent legal win.
Cigno and BSF Solutions had conceded during legal proceedings that if an “account keeping fee” charged weekly to consumers who took on a loan was considered a fee for the provision of credit, then it had engaged in credit activity.
The judgment shows the account-keeping fees – which ranged from $5.95 to $28.50 a week – charged across the loans amounted to almost $34m.
“Asic is essentially having to do whack-a-mole with this company,” says Jillian Williams, of the Indigenous Consumer Action Network, which supports consumers in northern Queensland.
“These really are people living below the poverty line that have been targeted by this company, and our concern is that may continue while this entity exists in one form or another.”
Debt collection ramp-up
According to Rose Bruce-Smith, a policy officer at the Consumer Action Law Centre, Cigno’s loans have tended to range from $100 to $200. Some have been up to $1,000. With the fees added, borrowers end up repaying a much higher value than the original loan.
“We had one caller who received a $200 loan and was requested to pay $1,600. Another caller had a loan for $200 and had paid $160. Cigno contacted them asking for $1,200 in account-keeping [fees],” she says.
In Grace’s case, she took out two loans with Cigno. The first time, in 2020, she borrowed $250 to afford rent on a new property after escaping a violent relationship. She paid back $454.
Grace, whose two children are now 10 and 15, had paid $162 on the $250 loan she took on in 2022, but says she had long been under the impression she’d paid off her loan because she hadn’t heard from the business in months. Instead, Cigno contacted her earlier this year, claiming she owned them $1,588.
Grace sent a letter to Cigno shortly after demanding it cease trying to collect the money because it had issued her the loan without a credit licence. The business responded and offered to settle her debts for $540, but she refused to pay.
In the lead-up to this year’s federal court’s judgment, consumer groups say they saw a ramping up of Cigno’s debt collection activities.
“We saw direct debits to Cigno in bank accounts again, and more people mentioning that Cigno is a debt that they’re having to manage,” Williams says.
Guardian Australia has seen an email from one consumer who received an email offering a 35% discount on his loan if paid in full. It was sent two days before the federal court judgment was delivered.
Grace also got an email from Cigno warning her that failure to pay the loan would result in an “adverse mark” on her credit file and would impact her ability to obtain credit in the future. She was offered a 35% discount on the total $1,588 debt they claimed she owed if she paid in full. She ignored the email. The next day the court ruled Cigno and BSF Solutions could no longer collect on the loans.
New laws yet to be tested
The federal court also ruledthat Swanepoel, Cigno’s director, could no longer be involved in credit activity by Cigno so long as it doesn’t hold a licence.
But in December, just two months after Asic launched its latest legal action, Cigno began operating under a new business, FTA Data Solutions, according to business documents lodged with Asic. The firm has a credit licence and is owned by Mark Swanepoel’s brother Ryan Swanepoel, who was not the subject of Asic’s legal action.
Ryan Swaneopol and Cigno were contacted for comment, but did not respond before the deadline.
FTA Data Solutions also runs Quickle, another payday lender which offers loans of up to $10,000. Cigno has in the past only offered loans of up to $1,000. But now the FTA Data Solutions website is advertising loans of up to $10,000.
Bruce-Smith says that because the business has a credit licence there will be far more protection for consumers who take on loans with the company. By law, businesses who hold credit licences are required to assess consumer’s financial situation before issuing loans, and adhere to the credit act.
“That being said, we see so many bad outcomes with licensed people as well, so it’s definitely not a panacea,” Bruce-Smith says.
Last year, the government passed anti-avoidance measures to stop companies that morph into new models in a bid to escape ASIC attempts to shut them down. Many of the submissions made pushing for the legislation urged its necessity specifically to stop Cigno. The new laws are yet to be tested.
A spokesperson for Asic says it will continue to monitor the activities of Cigno to ensure its complying with the law and that the new anti-avoidance measures are another option for Asic to pursue in the future.
Grace says she is relieved she’ll no longer be chased for her loan, but she thinks more should be done.
“I do believe that everyone that has paid more than they should have should be entitled to compensation,” she says. “So many people have gone through financial hardship because of these things.”
* Name has been changed
