Bank overdrafts just as expensive as payday loans says Which?
According to the consumer rights campaigner, borrowing £100 for 31 days will cost £30 with a Halifax authorised overdraft or £20 with some Santander accounts, and borrowing the same amount for the same time with a payday loan company costs between £20 and £37.
The research also showed that, similar to rolling over a payday loan, people can rack up sky high default charges if they use an unauthorised overdraft, and be hit with high interest and charges if they stay in their unauthorised overdraft for long periods.
With the Halifax Reward current account and the Santander Everyday Account it can cost £100 in charges for going £100 into an unauthorised overdraft for a month.
Which? said that the Financial Conduct Authority’s (FCA) proposed new rules to clamp down on lenders won’t cover high penalty and default fees for payday loans, overdrafts and other high-cost credit products.
Which? thinks this is a major omission and has launched the Clean Up Credit campaign calling on the FCA to crack down on poor lending and unscrupulous practices across the whole market. We want to hear from consumers about their experiences of using credit, and we will share this with the FCA to encourage it to set tougher new rules.
Richard Lloyd, Which? executive director said:
“The Government and regulators have rightly focused on the scandal of payday lending, but they must not lose sight of the urgent need to clean up the whole of the credit market. High street bank overdraft fees can be just as eye-watering as payday loans.
“Consumers need the credit market to work competitively. It’s time to clamp down on excessive charges and irresponsible lending, and to make sure borrowers are being treated fairly whatever form of credit they’re using.”