ASIC beats payday lender Cigno in ban case

“The very ones who [the lending] were helping are the people who are now in a worse situation, and of course we now have even more of those people,” said Jan “John” Swanepoel.

Mr Swanepoel said his loan work had ceased and disputed claims that the model was hurting people.

A former bankrupt, Mr Swanepoel is the director of Gold-Silver Standard Finance, which had lent people money for short periods – sometimes as little as $50.

Together

This loaner has worked in conjunction with Cigno, whose manager is Mr Swanepoel’s son Mark, a former Super Rugby half-back. Cigno would help offer services such as accelerating loan arrival to customers and charging high fees.

The structure did not trigger the normal protections under the National Credit Code because the fees associated with only one party – the Gold Silver Standard Finance loan – were low enough to qualify for an exemption.

Still, ASIC had argued that the scheme was “predatory” and causing “significant harm to consumers”, and issued its first product intervention order.

He said the fees could amount to effective interest rates of up to 990% of the loan amount.

An example cited was of a woman on a Centrelink Newstart allowance borrowing $120 from Gold-Silver and then being charged a fee consisting of a $90 supply fee and a $5 weekly account maintenance fee, $95 from Cigno. When the borrower defaulted, dishonor and weekly charges brought the bill to $1,189.

ASIC’s order ended the model’s loophole, but Cigno challenged the order in court in September.

He said ASIC had wrongly focused on the harm caused by the overall pattern and argued that the regulator should instead identify any harm in regulated “financial products” – the actual Gold-Silver loan.

They [authorities] invent their little things… like the invasion of Iraq… so that they get their result.

— Jan Swanepoel

But on Wednesday, Sydney Federal Court Judge Angus Stewart backed the link between the global loan model.

“In my opinion, Cigno’s approach defines too narrowly what ASIC should be happy with,” he said. “There are a number of indications that it need not be a financial product or a class of financial products that ‘itself’ directly causes harm.

“The causation requirement is satisfied if the harm would not have occurred if the financial product or category of financial products had not been made available in those circumstances.”

While Cigno argued that the product intervention power impinged on freedom of contract and should therefore only be construed narrowly, Judge Stewart said there was no suggestion that the basis for the powers to be triggered should be considered. in this way.

“Indeed, for certain identified wrongdoings to be addressed, it is necessary that this basis be interpreted more broadly than what Cigno argues. Such harm includes harm resulting from the fact that the product in question is offered to a particular class of consumers or under particular circumstances,” he said.

Jan Swanepoel dismissed suggestions that people had been taken advantage of, saying examples such as the woman in front of $1,189 did not involve refunding the money anyway.

He also alleged that ASIC misinterpreted any wrongdoing. “Out of hundreds and hundreds of thousands [of loans]they only had 160 complaints or something,” he said.

“They [authorities] make up their little things…like the invasion of Iraq – you know how they work and shake things up to get their result.

ASIC Commissioner Sean Hughes backed the judgment and said the regulator would “act quickly where we see high-cost products that seek to exploit the immediate, everyday needs of financially vulnerable consumers.”

The court’s decision marks a victory for the regulator where it had previously failed under different laws.

In 2014, ASIC unsuccessfully tried in a Federal Court case to test the National Credit Code to beat the model used by Teleloans and Finance & Direct Loans (FLD). Ryan Swanepoel was a director of FLD.

At that time, the court ruled that the wording of the code was not applicable, given the design of the contracts: one for the credit of the lender and the other for the services of the helping company.

ASIC’s current prohibition power covers the entire model, regardless of the entities involved in the loan structure.

Last year he cited a similar pattern involving the companies MYFI Australia Pty Ltd and BHF Solutions Pty Ltd, which had ties to previous deals.

The company is looking for The Australian Financial Review then showed that the director of BHF Solutions was Brenton Harrison, who was also a director of the Teleloans company named in the 2014 case. MYFI Australia director Jack Martin gave his address as the same Gold Coast residence than Mark Swanepoel.

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