Discretionary Commission Arrangements - Compaints and refunds
Safety Net Credit and Tappily, two of the UK's leading lenders, have recently gone into administration. This has caused a great deal of concern for many people who rely on these companies for their financial needs.
Safety Net Credit is a lender that provides running account credit facilities. They are authorised by the Financial Conduct Authority (FCA) and offer customers flexible credit limits rather than traditional loan agreements. Customers can apply for a credit limit up to £1000 with repayment terms of up to 12 months.
Tappily is an online lender that offers short-term loans of up to £500 with repayment terms of up to 3 months. They are also authorised by the FCA and provide customers with an easy way to access funds quickly when they need it most.
The news that both Safety Net Credit and Tappily have gone into administration has been met with shock by many customers who rely on them for their financial needs. It is important to note that this does not mean that these companies have ceased trading, but rather that they are undergoing restructuring in order to ensure their long-term sustainability.
In light of this news, it is important for customers to be aware of their options if they need access to funds quickly or if they are looking for alternative lenders. There are a number of other lenders available in the UK who offer similar services as Safety Net Credit and Tappily, such as CashLady, QuidMarket and Choose Wisely. Additionally, there are also other options such as payday loans or peer-to-peer lending platforms which may be suitable depending on individual circumstances.
It is important for customers to do their research before taking out any form of finance so that they can make an informed decision about which option best suits their needs. It is also important to remember that all forms of borrowing come with risks and should only be taken out if absolutely necessary.
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When a company goes into administration, customers that were owed money by the company become unsecured creditors. This means that their debt is not given priority under law and they will only be repaid if there are enough assets available to cover it. Generally speaking, unsecured creditors are last in line when it comes to repayment of debts and can often find themselves without any return.
The administrators of the company can choose to either close down the business or keep it running while they try to restructure its finances. If the business is shut down then all existing assets will be sold off in order to pay back creditors, including some of those that are unsecured. However, if these assets do not cover all of the debts then no further payments will be made.
In some cases, companies may offer an informal agreement for customers who have become unsecured creditors - known as ‘creditors’ voluntary arrangements’ - where they agree to repay a portion of what is owed in regular instalments over a period of time. This can result in some customers getting back part of their money but it should always be remembered that this arrangement is completely voluntary on behalf of the company and is not guaranteed by law in any way.
Overall, becoming an unsecured creditor when a company goes into administration carries with it greater risks than having a secured creditor status - since it generally results in less chance of being repaid and higher likelihood that much, if not all, of your investment goes unrecoverable.
Indigo Michael Limited is a creditor who owns SafetyNet Credit. As well as SafetyNet Credit, Indigo Michael Ltd also own Tappily, which was launched in 2017 as a sister company to SafetyNet Credit. Both companies offer a revolving credit service and use an ‘open banking’ method to finance – this credit approach and open banking system will be discussed in more detail below. Compared to SafetyNet credit, Tappily offers higher credit limits and lower rates, but is marketed at customers with slightly better credit scores.
Revolving credit is a type of loan that gives you access to a set amount of money. You can draw on this money until you have borrowed up to the maximum amount, which is known as the credit limit. As the outstanding balance is repaid (plus any interest), you can once again borrow against the account. So, in essence, revolving credit allows the borrower to spend the money they have borrowed, repay it, and then borrow again as required. Examples of this type of loan are credit cards or an overdraft.
According to SafetyNet Credit , loans of this nature work as a ‘safety net’ (see what they did there?!) for your bank account, as fundamentally, you have an agreed amount of credit that is linked to your bank account, and due to SafetyNet monitoring your balance, they “give” you money when you need it and take it back when you can afford it. Problems and complaints about this aspect of the loan will be looked at in more detail below, as it is not always a positive experience (according to claims management companies and reviews by customers).
Yes, one of these being that the customer is charged higher interest rates compared to a traditional instalment loan. As these revolving lines of credit are more flexible for the customer, they are intrinsically riskier for lenders, and hence, higher interest is charged. SafetyNet Credit charge 0.8% per day (albeit this is capped at 40 days) – this is sitting right on the legal maximum, so anyone choosing to take out this type of loan should really look at other options first.
One other disadvantage is that customers are tempted to spend more than they can afford, as they do not have to make large scheduled payments, and equally can just keep borrowing and paying back in dribs and drabs (subject to minimum payments agreed in the contract).
Very simply, it means that all regulated banks in the UK must let you share your financial data (that is, any information that can be found on bank/credit card statements – regular payments, spending patterns/habits, the companies you use) with authorised/regulated providers – with your permission.
This system has been introduced to innovate financial services (and increase competition among financial services companies), and ultimately provide you, the customer, with improved products to manage your money.
Both SafetyNet Credit and Tappily have incorporated this system into their lending model; the key thing to remember about signing up for a loan with them is that they must seek and obtain your express permission to share your bank account details with them. If your bank account cannot be accessed online, you will not be able to apply for loans with companies who use this open banking system. If you do not wish to share your data with any company, then SafetyNet Credit and Tappily are not the loans companies for you.
Obviously, we all must be very careful about who we share our financial data with; you are protected by your bank only if you have shared your data with an authorised/regulated company - SafetyNet Credit and Tappily are both authorised and regulated by the Financial Conduct Authority (FCA).
The key point to take on board is that any company who has permission to look at your banking transitions is only able to do so on a read-only basis – you do not at any point hand over your internet banking login details etc, and they do not have any other control over your bank account.
Both companies invite applications from those who are over 18 years of age, have a UK current bank account with online banking, and who receive a salary or other regular income. They will also conduct an affordability check, to ascertain your ability to pay back the loan. They will do this by looking at your credit history and running a check of your credit record; bear in mind (as with any loan application) that this check will leave a footprint and could also cause a minor (and usually brief) negative effect on your credit score, so a word to the wise is not to make too many loan applications in a short period of time. In addition to a credit record check, they will also have a look (with your permission) at your current account activity.
As mentioned before, SafetyNet Credit charge interest at 0.8% per day, for up to 40 days. So, if you were to borrow £100 for two days, it would cost you £1.60 on top of the original £100 that you pay back. These seems pretty reasonable when looked at with these amounts; on the whole though, most customers borrow more, and for longer! So it could mean that you borrow £500, and after 40 days, you would owe £660, a whopping £160 interest payment!
New customers to SafetyNet Credit can borrow up to £500, typically to cover monthly costs so that customers do not go into their overdraft, and with continued use, could end up with a £1000 credit limit.
Tappily charges a lower rate of daily interest; as I write, they are charging 0.34% per day, so £0.34 for every £100 borrowed. Those wishing to borrow from Tappily rather than sister company SafetyNet Credit will need to have better credit scores to take advantage of Tappily’s lower interest charge.
If you are successful with your SafetyNet Credit application, you can choose one of two ways to receive your credit; the balance can be transferred to your current account, or you may choose the service that tops up your account to prevent it falling below the point that would put you into your overdraft, thereby saving overdraft fees.
Both companies claim to review your bank balance/transactions daily and monitor any changes in your financial position.
If they see, due to this monitoring, money being deposited in your account, they will automatically take payments. In theory you are able to set caps for these payments. You are also able to make payments manually.
As with other types of loans, e.g., payday, guarantor, customers are complaining that they were offered a loan/credit, when it should have been evident from looking at their credit history/bank account statements, that they would be unable to afford to make sustained repayments, and that the lender was irresponsible to lend to them in the first place. Customers have complained to claims management companies, including Redbridge Finance, that their bank accounts would show that they had high levels of financial commitment, or had several other loans, or had a gambling addiction, all of which should have indicated that they should not have been lent any money.
Other complaints are that customers did not realise that interest is added every day as a percentage of the loan balance, or that it is too easy to be repeatedly given a credit increase (if the account is managed well) and not realise that this would increase the interest paid.
Another common complaint is that both SafetyNet Credit and Tappily have taken repayments as they have seen money deposited in the account, with no warning, and in some cases, customers claim, the repayment amount has left them with no available funds for everyday living or has tipped them into their bank overdraft – the very thing they had been trying to avoid! Both SafetyNet credit and Tappily insist that customers can limit the amount taken by automatic repayments (subject to minimum repayments), but many customers claim this does not work or does not happen, leaving them in a far worse financial situation than before they had the loan.
If you believe that they did not undertake in-depth checks to see if you could afford the loan, then we can help by assessing your claim to see if you were mis sold the service they offer. Or if you feel that you have been treated unfairly, for example if your financial circumstances have changed, and SafetyNet Credit or Tappily have not tried to help you in any way, then please go to www.redbridgefinance.co.uk and register.
Our claims experts can take on your case and make a claim for a full refund of all the interest and any charges that SafetyNet Credit and/or Tappily have charged you. If you want to make a complaint against either company, the process is very straightforward. All you need to do is sign up on our site and let us know which lenders you want to make a claim against. We then assess the information you have provided and take your claim forward by making a complaint on your behalf. We deal with the responses from SafetyNet Credit or and/or Tappily, and of course will keep you informed every step of the way.
If you have had problems repaying your loan or think you might have been mis-sold a loan, then you could be entitled to a refund. Contact us today by going to www.redbridgefinance.co.uk and signing up, and we can assess if you have a claim.