Debt charity calls for cap on unarranged overdraft fees
According to a survey of 1,019 of the charity’s clients with overdrafts, on average before seeking advice, each went overdrawn in 11 of the last 12 months. Meanwhile nearly two thirds went over their limit in the last year, with penalty charges averaging £225 per year.
Based on the survey results, Step Change estimates that approximately 9,600 people each month go into an unarranged overdraft, in average five out of 12 months, before seeking any debt advice. It subsequently estimates those seeking advice on overdraft debt in any given month will have paid at least £1.35m in unarranged fees between them in the last 12 months.
With this in mind the charity says it is again calling for a maximum monthly charge (cap) on unarranged overdrafts, to be set independently by the FCA.
“Financially vulnerable people need help rather than being pushed further into trouble each month, said Step Change chief executive Mike O’Connor. “It is time for the FCA to intervene, as they did with payday loans, to set a cap on the amount banks can charge for unarranged overdrafts.
“The FCA also needs to urgently look at how to reduce the role of overdrafts in problem debt so people can finally break free from this vicious cycle that far too many of them become trapped in.
“Without strong and swift action, hundreds of thousands of financially vulnerable people will see their problems get worse and millions of pounds will keep being added to the country’s personal debt problem.”