Unauthorised Overdraft Charges ‘Higher Than Payday Loan Interest Rates’
July 12, 2016
The charges associated with unauthorised overdraft use are higher than those typically charged as interest by providers of payday loans.
That’s according to the consumer group Which?, which is calling for more to be done to limit the extent to which bank account service providers charge their customers for entering overdrafts without prior arrangement.
Research carried out on behalf of Which? found that someone who enters an overdraft without prior authorisation in the UK is usually subject to exceptionally high charges.
The concern is that many people aren’t aware of just how costly unarranged overdraft use can be and are landing themselves into debt trouble by entering them without realising the potential consequences for their personal finances.
Which?’s research into the issue was based around finding ways to borrow £100 for a period of 28 days, with high street banks found to routinely charge considerably more for this kind of service than a typical payday lender.
Payday loan providers have come to be notorious throughout the UK for levying very high interest rates for their short-term loans but there has been a clampdown on their activities by the Financial Conduct Authority, which regulates the industry.
A payday lender can now charge no more than £22.40 in relation to a loan worth £100 taken out for a period of 28 days.
According to Which?, a likely charge for this kind of service from a bank account overdraft provider would be close to £90 within that same timeframe.
“People with a shortfall in their finances can face much higher charges from some of the big high street banks than they would from payday loan companies,” explained Alex Neill, Which’s director of policy and campaigns.
“The regulator has shown it’s prepared to take tough action to stamp out unscrupulous practices in the payday loans market, and must now tackle punitive unarranged overdraft charges that cause significant harm to some of the most vulnerable customers.”
If you live anywhere in Scotland and you are struggling with personal debt problems then Scotland Debt Solutions can help. Contact one of our experts today to arrange a free and confidential consultation.
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