UK's bank charges for overdrafts as expensive as payday lenders: research
14 October 2013
While banks in the UK insist they were offering clear and simple charges, according to research firms, their fees for overdrawing could be as expensive as those imposed by payday lenders.
According to research by Which?, people could rack up "sky high" default charges if they slipped into an unauthorised overdraft. Some other borrowing arrangements also came in for criticism for being "eye-wateringly" expensive.
Citing several examples, the consumer group pointed out that borrowing £100 for 31 days would cost £30 with a Halifax authorised overdraft or £20 with some Santander accounts, while borrowing the same amount for around a month with a payday loan firm such as Quickquid or Wonga cost between £20 and £37.
Which? added, for consumers using Halifax Reward current account and the Santander Everyday Account it could cost £100 in charges for going £100 into an unauthorised overdraft for a month.
The findings of the group came hot on the heels of tougher action against the payday loans industry while the whole credit market would come under the supervision of the Financial Conduct Authority (FCA) next year.
The FCA recently announced measures it planned to impose, including limiting the number of times payday lenders were allowed to roll over loans to twice and forcing them to put "risk warnings" on their advertising.
Meanwhile, a campaign was launched today calling for a government crackdown on all forms of credit to stop banks and plastic card companies – not just payday lenders ripping off borrowers with excessive charges.
Earlier this month the Financial Conduct Authority announced proposed new rules for payday lenders which would take effect April next year.
However, Lloyd said government and regulators must not lose sight of the urgent need to clean up the whole of the credit market. He added, high street bank overdraft fees can be just as eye-watering as payday loans.
He said, it was time to clamp down on excessive charges and irresponsible lending, and to make sure borrowers were being treated fairly whatever form of credit they were using.
The move comes as Labour MP Paul Blomfield would launch a new cross-party charter tomorrow – in association with debt, consumer and anti-poverty organisations including Which? and Citizens Advice – that would set out recommendations to ensuring that borrowers were being treated fairly by the £7.5 billion payday loan and doorstep lending sector.