Payday loan firm Cigno is fighting an ASIC-implemented ban on a short-term credit model that can charge customers fees up to 1,000 per cent of the initial loan amount.
The corporate watchdog said Cigno had applied to quash the new rules via the Federal Court, while the company is also pursuing costs and a declaration that ASIC’s action against “predatory lending” was invalid.
The action comes two weeks after ASIC used its new product intervention powers to ban what it described as a predatory business model, where a short term credit provider and its associates charge fees under separate contracts.
The practice, used by Cigno and Gold-Silver Standard Finance, and more recently by MYFI Australia and BHF Solutions, involved associate firms charging significant upfront, ongoing and default related fees under a separate contract for management and administrative services in relation to the loan.
ASIC said, when combined, these fees added up to almost 1,000 per cent of the loan amount, with many financially vulnerable consumers often incurring extremely high costs they could not afford.
ASIC said it was considering Cigno’s application, and that the rules remain in place while the matter is before the court.
AAP
Be the first to comment