UPDATE – In January 2023, Indigo Michael, who operates the SafetyNet Credit and Tappily lending brands, went into administration.
See SafetyNet Credit goes into administration for a description of SafetyNet Credit’s previous lending and what is expected to happen in the administration. This is bad news for customers hoping for a refund for unaffordable lending.
The rest of this article is kept as background.
In July 2022 the Financial Conduct Authority imposed major new restrictions on Indigo Michael, the company that owns the SafetyNet Credit brand.
SafetyNet Credit (SNC) temporarily stopped lending in July for a few days. Customers were told on 13 July 2022 by email:
SafetyNet has in recent weeks been paying close attention to the significant changes we have seen in customer behaviour as a result of the current cost of living crisis. As a result of this and following engagement with the FCA we have decided to temporarily stop all lending until further notice.
That makes it sound as though SafetyNet Credit made this decision… but it probably had little choice.
On 15 July customers were told that lending had restarted. But by mid September it was no longer possible to apply for credit on their website. If you try you are given the message
“Thank you for choosing SafetyNet. Unfortunately, your
application was unsuccessful as it does not meet SafetyNet’s lending criteria.”
The new FCA restrictions
The FCA has brought in 7 new restrictions on SafetyNet Credit.
My summary of these is:
- when setting a credit limit, SNC must assume the full repayment will be taken and check that the lending would be affordable if this is done.
- SNC must not use a CPA to take repayments where there are insufficient funds in the account or taking the payment would leave insufficient funds for priority debts or other essential living expenses, leading to the customer borrowing further from SNC or another firm, or entering their overdraft facility to meet such expenses.
- SNC must explain to customers how its use of CPA is changing.
- where a customer may miss a minimum repayment, SNC should contact the customer explaining why the CPA has not been used and invite them to make a payment or offer to freeze interest and accept a lower payment.
- stop objecting to complaints brought by claims companies unless it has specific evidence to support this.
What should SNC customers do?
If you currently owe a balance
The first email from SNC explained that it has paused taking any payments from your bank account. It pointed out that you can make a payment to them manually to minimise the interest that is being added.
But from 15 July, SNC has restarted not just lending but also taking money from your account. SNC says:
Repayment will still be made using Continuous Payment Authority (CPA) but will now be capped against new affordability criteria. Customers who wish to pay more than the sum restricted by cap will be able to do so via the product dashboard.
If you can simply clear your current balance and not be left so short that you have to borrow again from some other lender, then that is your best option.
Clear the account and close it is my suggestion!
What is important is that SNC interest is “capped” – after 40 days no further interest will be added.
So if you cannot afford to clear the whole balance now, you do not need to worry about huge amounts of interest being added every month – after 40 days it becomes interest-free from that point.
If you are struggling to pay your bills and essential expenses at the moment, read Can’t pay your bills & debts? What help can you get? and talk to a debt adviser about your options. Expensive credit such as SafetyNet Credit may get you through to the next month, but it isn’t helping you clear your debts.
Consider an affordability complaint now
NB this may now be pointless as SafetyNet Credit has gone into administration
If you have borrowed repeatedly from SNC for more than a few months then you should consider making an affordability complaint. This applies if you still have an active account, if a balance is being paid in a debt management plan or you no longer owe anything.
If you win this, you will get a refund of some of the interest you have paid.
You don’t have to use a claims company to do this. You can treat it as a payday loan complaint and use the free template letter here.
SNC’s complaint handling has been very poor recently. My guess is now the FCA is watching, they will be trying to a lot better! But if you don’t get a reasonable offer, send it straight to the Financial Ombudsman.
Also look at affordability complaints about other expensive credit you have had:
- has a credit card or catalogue increased your credit limit too high?
- large loans including car finance
- have you been in your overdraft constantly for a long period?