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New ‘Centrelink loans’ scheme tips ASIC’s banning hand – The Australian Financial Review

People have been lugged with repayments of 490 per cent of the original loan, and an old player is involved, ASIC says.



Because of the separation of companies, the system fit within legal restrictions surrounding fees and interest could be charged on a loan. In a notice to the public at the time, ASIC had lashed the model as causing significant consumer detriment but Jan Swanepoel had disputed claims it could hurt people.
Still, the banning power went through and the Federal Court has so far dismissed one legal attempt by Cigno to overturn the ASIC intervention. Cigno has appealed again.
ASICs power now is turned on a similar operation but with the loan this time made as continuing credit, in which multiple advances are contemplated.
These continuing credit contracts appear to have been introduced into the market following ASICs previous product intervention order relating to short term credit made on 12 September 2019, the consultation paper said.
ASIC said this new scheme saw BHF Solutions issue loans under a continuing credit contract. Cigno charges fees including fast tracking of loans and management of the credit contract.
The continuing credit contracts were issued by BHF Solutions in a way that does not give retail, or everyday, clients access to external dispute resolution schemes and without a credit licence, so borrowers did not have consumer protections under the National Credit Act, ASICs paper said.
It cited an example of a person using Cignos services to borrow $250 and was charged almost $215 in upfront fees, $80 in ongoing account-keeping fees and $685 in default fees.
The borrower only made $309 in repayments and as at December last year still owed Cigno and BHF Solutions over $900, ASICs paper said.
The Consumer Action Law Centre backed ASIC’s latest application to use the banning power.
Far too often people are being charged unfair and exorbitant fees under these agreements, the centre’s Gerard Brody said.
Still, Mr Brody maintained that legal reforms were needed to avoid ASIC needing to play whack-a-mole in the short-term high-cost credit industry.
In 2014, ASIC tried unsuccessfully in a Federal Court case testing the National Credit Code to beat a payday lending model used by Teleloans and Finance & Loans Direct (FLD).
Ryan Swanepoel, Jans other son, was a director of FLD. BHF Solutions Mr Harrison was a director of Teleloans.
Attempts to obtain comment from BHF Solutions and Mark Swanepoel were unsuccessful.

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