Overdraft fees that cost more than payday loan

BANK customers who go £100 into the red can pay £180 in punishing overdraft charges, it emerged yesterday.

The news from consumer group Which? came amid concerns that high street banks treat customers more badly than payday loan firms.

Which? wants the City watchdog to crack down on the fees, which can be 7.5 times higher than those allowed for a payday loan.

It looked at overdraft fees charged by Barclays, Santander, Lloyds, TSB, RBS/ NatWest, HSBC and Halifax.

It compared the charges that would be applied to a £100 overdraft over 30 days compared with the maximum figure of £ 4 that can be levied for a £100 payday loan.

RBS and NatWest could charge £180 if the 30 days ran across two billing periods.

It could be £160 at Santander, Lloyds and TSB, and £150 at HSBC and Halifax. The cheapest was Barclays, at £59.50.

The Financial Conduct Authority is looking at overdraft charges in its review of high-cost, short-term credit.

Which? argues that banks, which set their own monthly maximum charges for overdraft borrowing, should not charge more for unarranged overdrafts than they do for arranged overdrafts.

Vickie Sheriff, director of campaigns, said: ‘If banks can continue to set their own charges, then consumers will continue to be hit by exorbitant fees.’

The banks said customers could protect themselves against high fees by asking for an authorised overdraft.