ASIC Awarded Nearly $1.4 Million in Costs Following Cigno, BSF Payday Lending Case

Australia’s corporate regulator has secured nearly $1.4 million in costs after its successful Federal Court action against Cigno Australia, BSF Solutions and their directors over unlicensed credit activity and prohibited consumer fees. The costs ruling follows April civil penalties totaling $7 million, although ASIC is separately appealing those penalties as inadequate.

The Australian Securities and Investments Commission’s costs recovery represents the latest development in a long-running enforcement action against a short-term lending model that regulators said was structured to circumvent consumer-credit protections.

The Federal Court previously found that Cigno Australia Pty Ltd and BSF Solutions Pty Ltd engaged in credit activity without holding an Australian credit license and charged fees prohibited under the National Consumer Credit Protection Act. Cigno director Mark Swanepoel and BSF director Brenton Harrison were found to have been involved in the contraventions.asic.gov+1

Penalty Case

In April, the Federal Court ordered Cigno Australia and BSF Solutions to pay $3 million each in civil penalties. Swanepoel and Harrison were each ordered to pay $500,000, producing a combined $7 million penalty.asic.gov

The action centered on the companies’ “No Upfront Charge Loan Model,” under which BSF provided short-term loans while Cigno entered into separate service agreements with borrowers. Although the model was framed as separating lending from service fees, the court found the companies were carrying on regulated credit activity without the required license and were charging fees that credit law prohibited.asic.gov+1

ASIC’s successful costs request, reported at nearly $1.4 million, means the respondents now face a substantially higher financial consequence in addition to the civil penalties.law360

Scale of Consumer Fees

The underlying conduct involved a large volume of small-dollar loans and a substantial amount of fees charged to consumers.

ASIC said the entities made more than $34 million in short-term loans to over 100,000 consumers between July and December 2022. During that period, consumers were charged more than $70 million in fees, according to the regulator.asic.gov+1

Court materials identify more than $63.4 million in fees charged by Cigno, including approximately:

• $34 million in account-keeping fees

• $24.7 million in default fees

• $4.8 million in payment-schedule change fees

BSF also charged more than $6.5 million in late-payment fees, ASIC’s published court material shows.download.asic.gov

Later reporting and ASIC commentary stated that fees associated with the model exceeded $90 million from July 2022 through May 2024.linkedin

The figures illustrate why regulators and consumer advocates have focused closely on fee structures in small-dollar credit. A product may advertise no upfront charge or a low principal balance, but recurring account, default, servicing and late-payment fees can materially increase the cost to financially stressed borrowers.

ASIC Appeals $7 Million Fine

The costs ruling does not conclude the matter. ASIC filed an appeal in May challenging the $7 million penalty outcome, arguing that the penalties imposed by the Federal Court should be higher.asic.gov

ASIC’s notice of appeal sought far more substantial penalties than those imposed at first instance. The regulator’s appeal materials seek penalties of $12 million against one respondent, $105 million against another, $10.4 million against a third and $21.7 million against a fourth, subject to the Full Federal Court’s determination.download.asic.gov

The appeal is significant for the consumer-credit sector because it may provide additional guidance on how courts should assess deterrence, the seriousness of unlicensed lending activity and the relationship between unlawful fee revenue and civil penalties.

Collection and Compliance Implications

For lenders, servicers and collection firms, the case reinforces several practical compliance lessons:

• Substance outweighs labels. Separating lending, brokering and “service” functions among affiliated entities will not necessarily place conduct outside the consumer-credit licensing regime.

• Fee design requires close scrutiny. Fees described as account maintenance, default, payment-change or late-payment charges may still attract regulatory attention if they are connected to the provision or collection of credit.

• Unlicensed activity creates collection risk. The Federal Court’s earlier orders restricted BSF from demanding, receiving or accepting specified loan-related amounts while it lacked a license authorizing the activity.download.asic.gov+1

• Directors can face personal exposure. The court’s $500,000 penalties against each director underscore ASIC’s willingness to seek findings against individuals involved in corporate misconduct.asic.gov

• Enforcement costs can be material. The nearly $1.4 million costs award is a reminder that a civil penalty is not the only financial consequence of unsuccessful litigation.

ASIC Chair Joe Longo previously said the regulator believed the No Upfront Charge Loan Model was designed to sidestep consumer-protection laws and exposed consumers to harm. The regulator has also made clear that it views enforcement against high-cost and unlicensed credit models as part of its broader consumer-protection agenda.linkedin

The Full Federal Court’s eventual decision on ASIC’s penalty appeal will be closely watched by credit providers, fintechs, debt buyers and collection agencies operating around the boundaries of Australia’s consumer-credit laws.