Overdraft interest hikes ‘should be halted’

SWEEPING changes to bank account overdrafts which will see customers charged interest rates of up to 50 per cent should be postponed due to the coronavirus outbreak, financial campaigners have warned.

Banks are due to bring in new higher charges for overdrawn customers in the next three weeks.

Customers will typically face rates of around 40 per cent a year, although some Bank of Scotland, Halifax and Lloyds account holders will be charged up to 50 per cent in interest.

Campaigners have now called on banks to delay introducing these eyewatering rates, given that households are facing significant financial pressure because of the virus.

Baroness Altmann, a former pensions minister, said that increasing interest rates was “impossible to justify” in the current climate. “Banks should reconsider the rise in overdraft charges that is due to come in shortly,” she said.

“It is only right that the banks help customers who also will need tiding over a very difficult period in the weeks ahead. Those who are either sick, selfisolating or laid off during the coronavirus situation are already going to be struggling to cope and emergency borrowing should not have to be at such penal rates.”

However, major banks have rejected the notion of delaying or scrapping overdraft changes.

Martyn James of Resolver, a consumer complaints group, said that offering some leeway with overdraft charges would allow customers to avoid more serious financial difficulties in future. “Helping people to stay solvent means they’re more likely to pay loans, credit cards and other financial agreements,” he said. Mr James called on banks to suspend interest charges for customers who are overdrawn and to pause all debt collection activities.

Gareth Shaw of Which?, the campaign group, said banks should help vulnerable customers through any financial issues and make it easier for people to extend overdrafts temporarily.

Several providers, including Lloyds Bank, HSBC, Royal Bank of Scotland and TSB, have previously pledged to give homeowners a “payment holiday” if they are struggling financially because of the coronavirus. Experts have also called on banks to ensure these customers do not suffer damage to their credit scores by missing payments.