Major high-cost loan firm with 150,000 customers on the ‘brink of collapse’

January 5, 2023 Stan

A MAJOR high-cost loan firm with 150,000 customers is on the brink of collapse.

Indigo Michael, owners of SafetyNet Credit and Tappily are lining up insolvency experts, according to Sky News.

The firm could collapse within a matter of daysCredit: Getty

The company employs roughly 250 people and has about 150,000 active customers.

AlixPartners, the professional services firm, has been lined up to handle Indigo Michael’s insolvency.

It comes after the Financial Conduct Authority placed major restrictions on Indigo Michael which meant that it had to temporarily stop lending.

On July 15 customers were told that lending had restarted.

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But since mid-September, it is no longer possible to apply for credit on their website, according to Debt Camel.

If you try you are shown a message that reads: “Thank you for choosing SafetyNet. Unfortunately, your application was unsuccessful as it does not meet SafetyNet’s lending criteria.”

SafetyNet Credit gives you a credit limit which you can borrow up to – as a type of rolling credit.

This means it isn’t a loan you repay then have to apply for another.

So as long as you pay your loan amount off – you can borrow more cash without having to apply for it.

For example, if you have a limit of £500 and withdraw £400 and then repay that, you can immediately take out up to £500 again according to Debt Camel.

But unlike borrowing with a credit card, the lender chooses how much you have to repay and will take it for you automatically with the help of open banking.

And SafetyNet is a very expensive way to borrow.

The firm says that interest is charged at 0.8% per day only on any amounts you borrow, capped at 40 days with no extra costs and no hidden charges.

But a 0.8% per day interest rate is the maximum rate that a payday lender can charge.

Check if you can get a refund on interest

Sara Williams, founder of Debt Camel said that some SafetyNet borrowers could be owed refunds on interest payments.

She said: “If you have borrowed repeatedly from SafetyNet Credit 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 if you no longer owe anything.”

How can I reduce borrowing costs?

The first thing borrowers can do is try to improve their credit scores.

Boost your credit score

Getting on the electoral register is a must when it comes to building a decent credit score.

This proves who you are and where you live meaning it’s easier to get credit if you’re on the list.

It is also wise to check the electoral roll for any errors. You can sign up by registering to vote.

Don’t make too many credit applications as it can be seen as a sign of financial distress – and each application will be recorded on your file.

Use a “soft-search” eligibility calculator to show how likely you are to be accepted.

Always pay your bills as late payments are also recorded in your file.

Try and cut down your existing debt before applying for new credit as lenders may be reluctant to lend to you if you already have a large amount of debt.

The best credit card deals – with the lowest rates, biggest limits, cheapest fees and longest interest-free windows – are reserved for those with top-notch credit scores.

Lighten your loans

If you took out a loan a couple of years ago, it may be worth searching for a better deal.

Using a new loan at a lower rate to pay off an old one can sometimes make sense.

But remember, not everyone gets the rates advertised by lenders, as these are reserved for those with good credit ratings.

Check which loans you’re most likely to get without damaging your score by using an eligibility tool such as the one on Compare The Market or MoneySavingExpert.com.

Blitz your credit card balance

Do not let credit card debt linger. If you’re just paying the minimum each month, it could take decades to clear.

Only making the average 2.5% minimum monthly payment on a £5,000 balance means it would take you nearly 38 years to pay back and cost nearly £15,000 in total, on a typical interest rate of 22%.

Switch to a balance transfer credit card to get a window of up to 34 months with no interest charged.

Break the total debt down into monthly payments and set up a direct debit to ensure you wipe the balance in that time. If that’s impossible, try to switch again to a new card.

But not everyone can get the top balance transfer deals, as they require an excellent credit score.

Find out which cards you’re most likely to get with the eligibility checkers on Go Compare or Uswitch.

Obliterate overdraft charges

Dipping into your overdraft can be one of the priciest ways to borrow, with some banks charging 40% interest – almost double the average credit card rate.

Move to a bank with a free overdraft. To pay off larger overdraft debts, a money transfer credit card could give you an interest-free respite, but beware of high fees.