MPs fail tobacka limit on overdraft charging
A STATUTORY cap on inflated charges for unarranged overdrafts by banks similar to that imposed on payday lenders may not be appropriate, a committee of MPs has said.
Their statement came after research by consumer group Which? showed charges from big high street banks for borrowing as little as £100 are as much as seven-and-ahalf times higher than those from payday lenders – with Scots banks among the worst offenders.
Which says that customers who borrow £100 can end up paying as much as £180 in fees.
But the All Party Parliamentary Group on Alternative Lending has decided that while overdraft charges are “the elephant in the room” as not enough has been done to tackle debt problems, they did not feel that price caps, as seen in the payday loan sector, would be right.
Payday loan charges were capped in 2015 as part of moves to prevent people getting trapped in a debt spiral.
The Competition and Markets Authority’s two-year investigation into high street banks, which was completed in August, stepped back from wishing to impose a cap on unarranged overdraft fees from which banks make £1.2 billion a year.
However, the StepChange debt charity is calling for a statutory cap to be brought in by the Financial Conduct Authority (FCA), which is examining exorbitant overdraft fees as part of a review into high interest loans.
StepChange wants borrowers to be able to re-pay loans in an affordable and sustainable way.
Chief executive Mike O’Connor said: “The FCA should protect consumers as they did with payday loans and cap the cost of unarranged overdrafts. Reform needs to go beyond this and look at the way in which overdrafts are designed.”