Dad reveals payday lender swiped £3.2k from bank account to settle £200 loan

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A DAD of two had £3,271 automatically whisked out of his bank account in interest after taking out a £200 payday-style loan.

Struggling Dave Williams, 37, became stuck in a cycle of debt and borrowing after lender SafetyNet took the payments from his account as soon as his wages went in.

High-interest lenders are targeting people struggling financially amid the Covid jobs crisis, especially with Christmas coming up

His short-term borrowing was at a representative APR interest rate of 68.7 per cent, which works out at 292 per cent if measured over a year.

High-interest lenders are targeting people struggling financially amid the Covid jobs crisis, especially with Christmas coming up.

More than five million of us — one in ten adults — have high-interest short-term loans, which amounts to borrowing of more than £1billion a year.

SafetyNet uses new computer software to take payments directly from its 663,000 customers’ bank accounts under “open banking” rules, which is allowed under Financial Conduct Authority regulations.

Dave Williams became stuck in a cycle of debt and borrowing after lender SafetyNet took the payments from his account as soon as his wages went in

But it means some borrowers have almost their whole month’s salary swiped from their account within hours of being paid.

This can force them to borrow again straight away as they have no other way to pay home bills and living costs.

Unlike a credit card, there is no option to set a minimum repayment amount.

CCTV installer Mr Williams, from Manchester, said: “My salary went into my bank account overnight, but by the time I woke up, SafetyNet had taken a big chunk.

“I had no choice but to borrow from them again to pay bills and survive. It was a nightmare cycle of debt.”

‘Regulators are asleep at the wheel’

Payday loans and similar high-interest deals are booming again amid Covid’s impact on jobs and salaries.

The loans exploded in popularity after the credit crunch in 2008, but following a crackdown which saw big name Wonga go bust, they are flourishing again in these uncertain pandemic times.

Insiders say financial regulators have taken their eye off the ball.

The good news is there are ways to avoid payday lending, such as nought-per-cent credit cards for poor credit scores, and ways to climb out of the debt trap, including reducing payments.

SafetyNet describes itself as a rolling overdraft service.

It lends up to £1,000, charges interest at 0.8 per cent a day and stops charging after 40 days. But as it takes customers’ repayments from their bank accounts, usually on pay day, some borrowers are left unable to pay bills and need to take a new loan immediately, with up to 40 days’ interest again.

Mr Williams, who kept his debt secret from his wife, daughter, nine, and son, 15, said: “I got approved by SafetyNet for a £200 loan in 2015 although my credit was shocking.

“I was wary giving my bank details. Then pay day would come and they took a payment. I had no money to live on so had to borrow again. It turned into a near-continuous payday loan.

“It was so stressful and a burden I kept on my shoulders as I didn’t want to worry my family.

“SafetyNet is taking advantage of people in vulnerable positions.

“With Covid and now Christmas coming up, people struggling should look for other credit options and not short-term loans.”

SafetyNet said it checks new customers’ credit rating before lending and points to its 4.6 out of 5 rating from reviews on online consumer site Trustpilot.

But 69 per cent of complaints about the business’s parent company, Indigo Michael, are upheld by the Financial Ombudsman Service.

The finance chiefs can order lenders to repay customers’ interest if they were mis-sold loans because they could not afford to repay.

Mr Williams has had his £3,271 of interest repaid by SafetyNet.

Another customer, Monika Prostredna, wrote in a Trustpilot review of SafetyNet: “They take the full amount plus interest. You can borrow the money back immediately, but that’s a never-ending circle of debt.”

Campaigner Alan Campbell, of Salad Money, which lends to NHS staff, said: “High-interest lenders are targeting people struggling with Covid’s financial impacts and Christmas.

“New banking software can raid customers’ bank accounts, forcing some to borrow again immediately to pay bills. Financial regulators are asleep at the wheel and need to look at impacts on customers.”

SafetyNet, which says taking automatic payments reduces customers’ interest payments, said: “We concede Mr Williams should not have been lent to and we apologise.

“Such cases are a rarity.

“Checks that were not in place five years ago mean this is very unlikely to be repeated.

“SafetyNet is dedicated to setting the standard in affordability.”