Borrowers ‘Being Ripped Off by Extortionate Overdraft Charges’
May 23, 2018
The consumer group Which? has called for banks to be prevented from charging their customers “extortionate” amounts of money for using overdrafts on an unauthorised basis.
According to the group, going over overdraft limits can cost consumers thousands of pounds each year and the associated charges are said to be as much as seven times higher than those linked to payday loans.
Which? has also pointed out that unauthorised overdraft fees tend to impact people who are already struggling with personal debt problems and are generally least able to pay off the fees they incur.
The Financial Conduct Authority (FCA), which regulates the UK’s financial services sector, has previously described the fees charged by banks for unarranged overdraft use as being “too high”.
But Which? wants to see firm action taken to protect consumers from the damaging impacts of “sky high” overdraft charges.
“It’s alarming that the majority of banks are still allowed to charge more than payday loan firms through these rip-off overdraft fees,” said Gareth Shaw from Which?
“The regulator cannot drag its heels any longer,” he said. “We must see urgent action to restrict these charges, bringing them into line with arranged overdraft fees to finally end this unfair practice.”
Which?’s calls for changes to bank behaviour come after it compared the costs involved in borrowing £100 for 30 days via the unarranged overdraft facilities provided by 16 high street banks and a variety of payday lenders.
The research found that 13 of the 16 banks would typically charge their customers more in those circumstances than payday lenders.
The FCA has said that unarranged overdraft fees can often be “unreasonable” from a consumer perspective and suggested that the market as a whole “may need fundamental reform”.
In recent years the regulator has clamped down on the extremely high fees and borrowing costs charged routinely by payday lenders in an effort to better protect consumers and particularly those with serious debt problems.
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