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Business watchdog ASIC “shows record” on payday lending practices, could impose ban in August

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It was four days before Christmas when Sharon Alice first heard from Cigno, a payday loan company, who texted her offering her a quick little loan.

“I wanted to spend money on my family for Christmas dinner, so I applied for this loan,” Ms. Alice said.

“It was $ 175.”

At the time, Mrs. Alice was on the Newstart allowance and the money would help her feed the extra family members who would spend the holidays with her.

Christmas lunch was good, but what Mrs. Alice didn’t know was that the loan that helped pay for their celebrations was aggressively accumulating fees and charges.

Within a week, the amount owed had nearly doubled to $ 336.95.

A week later, it was up to $ 421.90.

It was three and a half weeks after the loan was granted that Mrs. Alice made her first repayment on the loan.

At that time, his balance with Cigno was $ 427.85.

During this period, Ms Alice had accrued “same day filing fees”, “financial supply fees”, “lender fees”, “refusal to honor fees”, “letter fees”. of refusal to honor ”and three separate iterations of the“ maintenance expense account ”.

This statement from Cigno shows that over $ 700 is owed on Mrs. Alice’s account.(

ABC Alice Springs: Oliver Gordon

)

Her first repayment of $ 94 barely started on what she now owed the Gold Coast based payday loan company.

“I was surprised. I was in shock,” Ms. Alice said.

Within six months, Mrs. Alice’s loan of $ 175 had turned into a debt of $ 760.

The Alice Springs resident said Cigno did not explain the fees and charges associated with the loan when she first applied.

“I thought it was just a loan that you would pay them back directly.”

‘Building casebook’ regulator

Cigno statement showing $ 175 loan turning into $ 760 debt in six months
Ms. Alice owed $ 760 on the loan within six months.(

ABC Alice Springs: Oliver Gordon

)

Mrs. Alice’s story is right one of the many shares on Cigno Loans and its associated company Gold-Silver Standard Finance Pty Ltd in recent months.

The Australian Securities and Investments Commission (ASIC) recently named the companies as one of the groups using a short-term lending model, which it said could cause “significant harm to consumers.”

The company’s watchdog spends this month collecting case studies like Ms. Alice’s.

ASIC Commissioner Sean Hughes said if enough stories like this are uncovered ASIC may be able to use new powers to crack down on lending to the most vulnerable in this underprivileged society.

“We are going to build together a compendium of all this information. It will tell us whether in fact we pass the legal test to impose a ban,” he said.

Commissioner Hughes said he would know by mid-August whether a ban on this type of practice would come into effect or not.

He forced others who had been affected by payday loan operators with high fees to come forward by the end of July.

“We are very keen to hear from people, so we are speaking to our regional commissioners across Australia, but we are also encouraging financial advisers to alert their clients to this action.”

“We pretty much lived on noodles”

ASIC may not need to look too far to find stories similar to Ms. Alice’s.

the ABC revealed several cases in which people say they took expensive loans that they didn’t understand and couldn’t afford to repay.

Consumer groups have repeatedly expressed concerns about the company’s business model.

And hundreds of customers have criticized the company on ProductReview.com.au.

On the site, a number of Cigno customers speak of extremely high refund rates, mysterious fees and charges, and an inability to contact the company.

Sydney mother-of-two Anna Bedford left a review on the site which read: “If I could give zero stars, I would.”

Ms Bedford said when Cigno falsely withdrew more than $ 500 from his account, it took several phone calls, emails and texts to contact the company in order to get his money back.

“I tried calling. It was an hour and 40 minute wait, and I didn’t even speak to anyone,” she said.

Ms Bedford called the next day and spoke to someone who processed her refund, but it took a week for her to be returned.

During this time, she and her children struggled to find money to eat.

“We pretty much lived on noodles. It made me cry.”

Ms Bedford had a clear message for anyone who found themselves looking for a loan.

“Never borrow from them. You will be in more debt than you will ever know,” she said.

Earlier this year, an ABC reporter who attended Cigno’s Southport address on the Gold Coast found only one entrance of some kind next to a restaurant with no obvious signs of occupancy.

ASIC said it hopes to know by mid-August whether it will be able to step in and possibly ban the type of lending Cigno is practicing.

All in accordance with the law

Cigno has been contacted for comment for this story but has not responded.

Publication of Cigno on social networks
A Cigno Loans post from their social media account.(

ABC News

)

ASIC said the company and its Gold-Silver Standard Finance partner were able to offer their short-term loans at high fees because their business model circumvented national consumer credit laws.

By dividing its brokerage arm from its loan arm, the company could use a loophole to charge fees well beyond what was normally allowed from a payday lender, the company’s watchdog said. .

But Commissioner Hughes said debts incurred by consumers using the business were of great concern.

“They stress the need for us to act and act quickly,” he said.

“Because these are loans for relatively small amounts of money for a short period of time, and the credit agreement itself is within a limit, they essentially function as an exemption from the law. credit.”


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