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.
If you’re worried that the council might take action against you for non-payment of council tax, entering into a Scottish trust deed can be a beneficial step. It stops legal action by all creditors included in the arrangement, and provides a ‘safe haven’ from which to regain control of your finances. As council tax arrears […]
A debt payment programme (DPP) remains on your credit file for six years, along with other default markers and court judgments that have been made against you. This can seriously affect your ability to borrow for this period of time, and longer. Even if you can secure borrowing, lenders are only likely to offer unfavourable […]
If you owe a debt of £5,000 or less, your creditor may send you a Simple Procedure Notice of Claim. This is a relatively new procedure that was brought in by the Scottish government and commenced on 28th November 2016 – their intention being to make it easier to resolve debt disputes. So if you’ve […]
A Bankruptcy Restriction Order may be made against you if it’s believed that you acted dishonestly, recklessly or unlawfully before you were made bankrupt, or during your bankruptcy. Your Trustee will inform the Accountant in Bankruptcy (AiB), and if their suspicions are upheld, a BRO of 2-15 years can be made depending on the seriousness […]
Debt payment programmes (DPPs) are an intrinsic part of the Debt Arrangement Scheme, which allows you to pay off unsecured debt at an affordable rate. If a debt payment programme is rejected by one or more creditors, the DAS Administrator can apply their discretion on whether to approve the plan, after using a test to […]
If you’re struggling to pay your unsecured debts, a debt payment programme could help you to regain control of the situation, and become financially stable again. Debt payment programmes are a fundamental part of the Debt Arrangement Scheme (DAS) in Scotland, and allow you to repay over a longer period of time. These programmes involve […]