The Full Federal Court today dismissed an application by Cigno Pty Ltd (Cigno) which sought to quash ASIC’s first product intervention order in relation to short term credit.
ASIC made the industry wide order, ASIC Corporations (Product Intervention Order – Short Term Credit) Instrument 2019/917, on 12 September 2019 to address what it considered to be significant detriment in the short term credit market, as set out in ASIC’s public notice (19-250MR).
This was the first order made by ASIC under these important new powers.
On 15 April 2020 the Federal Court dismissed Cigno’s application, which alleged ASIC had made legal errors in making the product intervention order and sought to have it quashed (20-089MR).
The Full Court has today upheld this decision, and found in favour of ASIC’s application of the product intervention order provision. In particular, the Court found that in assessing consumer detriment ASIC is entitled to consider not just the characteristics of the relevant financial product, but also the particular circumstances in which it is supplied.
ASIC Deputy Chair Sarah Court said ‘ASIC has been steadfast in our efforts to address consumer harm from high cost credit products. We made this product intervention order to put a stop to the significant detriment we saw from predatory lending.
‘We welcome this important decision, which will assist ASIC to protect vulnerable consumers from harmful short term credit practices in future.’
On 12 September 2019, ASIC made a product intervention order by way of legislative instrument for short term credit (19-250MR). The order came into force on 14 September 2019. The order followed ASIC’s consultation on the proposed intervention to stop significant consumer harm in short term credit.
The short term credit product intervention order lapsed in March 2021. ASIC did not seek to extend the product intervention order because of ambiguity in the product intervention provisions in the Corporations Act 2001 and the National Consumer Credit Protection Act 2009.
On 24 June 2021, the Treasury Laws Amendment (2021 Measures No.4) Bill 2021 was passed which provided amendments to ASIC’s product intervention power. The amendments remove the ambiguity and ensure ASIC’s ability to intervene in relation to the costs of a financial and credit product.
On 29 September 2020, ASIC commenced proceedings against Cigno and BHF Solutions Pty Ltd seeking injunctions and declarations of contraventions of the National Consumer Credit Protection Act 2009 regarding continuing credit contracts (20-226MR). A hearing was held on 27 – 28 May 2021. On 23 June 2021, the Federal Court dismissed ASIC’s application (21-144MR). ASIC is considering the judgment.
ASIC’s MoneySmart website has information about payday loans and alternatives and where to find free help with managing debt.