‘Rip-off’ overdraft fees cost seven times more than a payday loan
Consumer group Which? compared the cost of borrowing £100 for 30 days in an unarranged overdraft across 16 high-street banks with borrowing the same amount for the same length of time through a payday loan.
Overall, 11 of the banks investigated charged more than a payday loan company, and considerably more so in several cases.
The Financial Conduct Authority (FCA) previously capped payday loan charges, meaning that the cost of a loan in the above scenario would be £24.
In comparison, Santander was almost 7.5 times higher and £155 more expensive, charging its customers £179 over 30 days.
TSB is over 6.5 times costlier, charging £160. HSBC and First Direct are six times higher, at £150.
Which? said “not enough has been done” to protect consumers from these “sky high fees”.
The Competition and Markets Authority set out to tackle the issue by introducing a monthly maximum charge for arranged overdrafts in August last year.
Which?, along with 84 MPs from all the main parties, is demanding the FCA takes “urgent action” to end this “unfair practice” by restricting unarranged overdraft charges to the same level as arranged overdrafts.
Gareth Shaw, Which? money expert, said: “It’s alarming that the majority of banks are still allowed to charge more than payday loan firms through these rip-off overdraft fees. These extortionate fees can cost thousands of pounds a year, hitting those who can afford it the least.
“The regulator cannot drag its heels any longer.”