Bank overdraf t that costs 7 times more than a payday loan

CUSTOMERS of major high street banks face overdraft fees up to seven times more expensive than a payday loan, according to research.

In the worst case, Santander charges customers £179 for a £100 overdraft for 30 days.

Consumer experts and MPs are calling on the City watchdog to crack down on these ‘extortionate’ fees ahead of its report on overdraft charges, which is expected next week.

Banks can charge hefty ‘unauthorised overdraft’ fees if customers exceed an agreed limit. The competition regulator estimates these fees earn banks around £1.2billion a year.

Consumer group Which? compared the cost of borrowing £100 for 30 days in an unarranged overdraft across 16 high street banks with borrowing via a payday loan. At 13 of the 16 banks investigated the overdraft cost more than the payday loan.

Santander customers would currently pay £179 – almost 7.5 times the maximum £24 payday loan firms are allowed to charge borrowers. At TSB the fees would be £160, which is more than 6.5 times more costly than a payday loan.

HSBC and First Direct charge £150 and RBS and NatWest £144 – around six times more.

At Yorkshire Bank and Clydesdale Bank fees are five times the cost at £120.

Gareth Shaw of Which? said: ‘It’s alarming 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 least.’

Along with 84 MPs from all major political parties, Which? is demanding City regulator the Financial Conduct Authorlion ity takes urgent action to restrict these unfair charges.

Lloyds and Halifax have scrapped unauthorised overdraft charges altogether.

Santander said it is reducing its fees from July 10 and removing them entirely for four mil- customers with its 123, Select and Private accounts. Under the changes customers will pay £30-£100 to use a £100 unplanned overdraft for 30 days – rather than £179.

Consumer rights expert Martyn James said: ‘People thought the bad old days of bank charges ended years ago – but all firms did was switch from one-off big charges to smaller, more frequent ones, all topped up with interest. These fees are unfair, unclear and are pushing people further into debt.’

Santander said: ‘We continue to focus on supporting customers with managing their money and have specialist support teams for those struggling.’

A spokesman for TSB said overdrafts can help customers but added: ‘A lack of transparency in the market and understanding of how to use them can make them an expensive source of borrowing.’

First Direct, HSBC and NatWest said arranged payday loans and unarranged overdrafts are not comparable and that customers would pay far less for an arranged overdraft.

‘Pushing people into debt’