Australian Securities and Investments Commission v BSF Solutions Pty Ltd (Liability)

This proceeding was brought by ASIC against BSF Solutions Pty Ltd, Cigno Australia Pty Ltd and the sole director and secretary of each company. The dispute concerned a consumer lending structure the court called the No Upfront Charge Loan Model.

Under that model, BSF advanced small loans to consumers. Cigno handled the customer-facing and operational side of the arrangement. The court's orders define Cigno's role as including marketing the loans, processing applications, providing proposed credit contracts after approval, receiving and processing repayments, arranging direct debits, monitoring repayments and defaults, arranging changes to repayment schedules, sending statements and reminders, responding to consumer enquiries and remitting funds to BSF.

Consumers did not just sign one document. They entered into a loan agreement with BSF and a separate services agreement with Cigno. The loan agreement was described as a "No Fee for Credit Loan Agreement" or "No Upfront Charge Loan Agreement". The Cigno agreement was described as an "Account Keeping Agreement".

That split was commercially important because ASIC's case was that the BSF loan agreement itself did not require the consumer to pay interest or other charges for the provision of credit if the loan was repaid on time. Instead, the consumer paid Cigno fees under the separate services agreement. Those fees included an Account Keeping Fee, a Default Fee and a Change of Payment Schedule Fee.

ASIC said the structure should be judged by substance, not by labels. On ASIC's case, the consumer paid for the loan through Cigno's fees, even though those fees sat in a separate agreement and even though the BSF loan agreement was framed as having no fee for credit. The court accepted ASIC's contravention case on liability.

The central issue identified in the reasons was whether the Account Keeping Fee and the Change of Payment Schedule Fee charged by Cigno were charges made for providing the BSF credit. That mattered because the National Credit Code applies where, among other things, a charge is or may be made for providing the credit.

If those fees were truly charges for providing the credit, then the loan arrangements were within the regulated consumer credit regime. That in turn mattered for licensing, because the Credit Act prohibits a person from engaging in a credit activity without holding an Australian Credit Licence authorising that activity.

The court also had to decide what each company was actually doing under the legislation. For BSF, the issue was not just whether it lent money, but whether it was a credit provider, carried on a business of providing regulated credit and performed the obligations or exercised the rights of a credit provider. For Cigno, the issue was whether its conduct amounted to exercising the rights of a credit provider on behalf of BSF, providing credit assistance and acting as an intermediary between consumers and BSF.

The case also raised director involvement issues. The catchwords record that the directors had actual knowledge of the essential facts which led to the conclusion that the charges were made for providing credit. That is significant because it shows that director exposure can arise from knowledge of how the model works in practice, not just from formal titles or who signed which contract.

The court made declarations that BSF contravened section 29(1) of the Credit Act by engaging in credit activity without holding an Australian Credit Licence. The orders say BSF was, and remained during the relevant period, a credit provider to consumers under the No Upfront Charge Loan Model. The court also recorded that BSF entered into, performed and gave effect to 150,112 loan agreements, advanced loan amounts and sought recovery of loan amounts.

The court also declared that BSF contravened section 32(1) on each occasion it demanded, received or accepted a fee described as a Late Payment Fee while unlicensed.

For Cigno, the court declared that it contravened section 29(1) by engaging in credit activity without a licence when it provided the Cigno services. The orders state that, in performing the services agreement, Cigno exercised the rights of a credit provider on behalf of BSF in relation to a credit contract or proposed credit contract. The court also declared that Cigno provided a credit service by giving credit assistance to consumers and by acting as an intermediary between consumers and BSF for the purpose of securing the provision of credit.

The court further declared that Cigno contravened section 32(1) on each occasion it demanded, received or accepted the Cigno fees while unlicensed. The orders specifically tie the Account Keeping Fee to credit assistance and intermediary conduct.

The reasons also record that the respondents argued for a possible exemption if only the Change of Payment Schedule Fee was a charge for providing credit. The judge said there was no need to consider that argument because he found that both the Account Keeping Fee and the Change of Payment Schedule Fee were charges for the provision of credit.

The orders went beyond declarations of contravention. BSF was permanently restrained from demanding, receiving or accepting fees, charges or other amounts from consumers, including late payment fees and amounts of principal, in respect of loan agreements entered into during the relevant period for as long as it did not hold an Australian Credit Licence authorising the relevant activities.

BSF was also restrained from engaging in substantially the same lending model while unlicensed. That included entering into or performing agreements on the same or substantially the same terms as the loan agreement, providing credit under a model the same or substantially the same as the No Upfront Charge Loan Model, entering into or performing the same or substantially the same loan management facilitation agreement, and implementing a model on substantially the same terms.

Cigno was similarly permanently restrained. In relation to services agreements entered into during the relevant period, it was restrained from exercising the rights of a credit provider on behalf of BSF by providing the Cigno services, and from demanding, receiving or accepting fees, charges or other amounts from consumers, including the Cigno fees and amounts of principal owing to BSF.

Cigno was also restrained more broadly from exercising the rights of a credit provider and providing a credit service while unlicensed through substantially the same agreements and model. The orders also restrained it from demanding, receiving or accepting fees and other amounts while unlicensed in connection with those activities.

These orders matter because they show that the risk did not end when new loans stopped being written. The reasons expressly state that although loans ceased being written under the model from 21 December 2022, BSF and Cigno continued to demand, receive and accept fees, charges and other amounts from consumers under agreements entered into before that date. The court's orders addressed that continuing conduct.

The court declared that Harrison was involved in BSF's contraventions and that Swanepoel was involved in Cigno's contraventions. The catchwords state that the directors had actual knowledge of the essential facts which led to the conclusion that charges were made for providing credit. The court also made permanent restraining orders against each director from being involved in substantially the same conduct while the relevant company remained unlicensed.

For business owners and directors, that is an important governance point. A director cannot safely assume that risk sits only with the company that signs the loan contract. If the director knows how the model is structured, how customers are onboarded, what fees are charged and how repayments are managed, that knowledge may support involvement findings if the model breaches the licensing rules.

The broader commercial lesson is that the law looks at function and substance. In this case, Cigno's role was not treated as mere back-office administration. The orders describe conduct that went directly to regulated credit activity: suggesting and assisting applications for a particular credit contract with a particular credit provider, acting as an intermediary, receiving repayments, monitoring defaults, changing schedules and handling customer communications about the loans.

Businesses should therefore review all linked documents and all operational steps together. That includes websites, scripts, application flows, direct debit arrangements, collections processes, customer service functions and any intercompany agreements. The question is not just who is called the lender. It is who is doing regulated credit work and what charges the consumer pays because they obtained the credit.

Does this only matter if my business is the lender? No. The orders show that a business may be caught even if it does not advance the funds itself. If it suggests a particular loan, assists with the application, acts as an intermediary, receives repayments or exercises the lender's rights, it may still be engaging in regulated credit activity.

What if the loan contract itself says there is no fee for credit? That label was not enough here. ASIC's case, accepted on liability, was that consumers paid for the loan through Cigno's fees under the separate services agreement. The court looked at the substance of the arrangement.

What if we have already stopped writing new loans? The judgment shows that this may not end the issue. The reasons say the companies continued to demand, receive and accept amounts under existing agreements after new loans ceased. The restraining orders were framed to deal with that ongoing conduct while unlicensed.

Can directors be personally exposed? Yes. The court made involvement findings against the directors and the catchwords record actual knowledge of the essential facts. That makes model design, fee design and licensing a governance issue, not just a product or operations issue.

Did this judgment decide everything? No. The extract shows that penalties, some further injunctive questions, adverse publicity orders and costs were left for later steps. This page explains the liability decision and the orders visible in the judgment.

The liability judgment was delivered on 24 May 2024 by Jackman J in the Federal Court of Australia. The relevant period identified in the orders ran from July 2022 to 3 October 2023. The reasons also state that the Full Court had delivered an earlier decision on 27 June 2022 concerning an earlier related model, and that loans under the No Upfront Charge Loan Model ceased being written from 21 December 2022.

The extract shows that the court separated liability from later questions. Pecuniary penalties against all four respondents, some final injunctive issues concerning the directors, adverse publicity orders and costs were left for later determination. The court also set dates in late May and June 2024 for proposed adverse publicity orders and further case management.

Because this page is based on the published liability extract, it should be read as an explanation of the liability findings and the visible orders, not as a complete account of every later step in the proceeding.