Cigno Appeal | Full Federal Court Confirms Unlicensed Credit Activity Breaches

Introduction & Key Takeaways

The Full Federal Court has dismissed an appeal brought by BSF Solutions Pty Ltd (BFS), Cigno Australia Pty Ltd (Cigno), and their directors, upholding findings of unlawful credit activity under the National Consumer Credit Protection Act 2009 (Cth) (Credit Protection Act).

This decision reinforces the Court’s commitment to substance over form in assessing whether fees are charges for provision of credit.

• Fees charged under separate service agreements may still be deemed charges for credit if they are commercially linked to the loan.
• Entities involved in credit activity must hold an Australian Credit Licence (ACL), regardless of how these services are structured.
• Directors may be held personally liable if they have actual knowledge of the essential facts constituting the contraventions.

Overview of the Facts & First Instance Decision

As we reported earlier here, ASIC commenced proceedings against BSF and Cigno for operating a new lending model—the “No Upfront Charge Loan Model”—from July 2022 to October 2023.  Under this model:

1. BFS advanced small loans to consumers.

1. Cigno agreed to manage these loan agreements for BFS and provided ancillary services to the consumer, for which Cigno charged fees such as an acccount keeping fee and change of payment schedule fee.
2. Neither BSF nor Cigno held an ACL.

At first instance, the Federal Court found that:

• The Cigno charges were, in substance, charges for the provision of credit.
• BFS and Cigno contravened the Credit Protection Act by engaging in credit activity without a licence and accepting fees for such activity.
• Directors Mr Harrison and Mr Swanepoel were knowingly involved in the contraventions.

BFS and Cigno appealed the decision to the Full Federal Court

Summary of Reasons for the Decision

The Full Court (Anderson, Cheeseman and Rofe JJ) upheld the primary judge’s findings and dismissed the appeal, concluding:

• Substance Over Form: Although these fees were charged under separate service agreements, they were imposed “on account of, or by reason of” the provision of credit. The Court emphasised commercial reality over contractual labels.
• Integrated Business Model: BSF and Cigno operated a shared lending model. Evidence showed exclusive referrals, shared infrastructure, and coordinated systems, supporting the finding of a unified credit activity.
• Accessorial Liability: The directors had actual knowledge of the essential facts, including the structure and operation of the model, the nature of the fees, and the absence of ACLs. Their involvement in designing and implementing the model was sufficient to establish liability.

Conclusions and takeaways

As above, the appeal was dismissed. The appellants were ordered to pay ASIC’s costs and the stay on penalty proceedings was lifted.

This decision demonstrates that attempts to circumvent licensing obligations through creative structuring will be closely scrutinised.  And that directors must ensure they understand and comply with the licensing regime, or risk personal liability.