James Frith has joined forces with consumer champion, Which?, and over 80 fellow MPs in signing a letter asking for the Financial Conduct Authority (FCA) to bring an end to rip-off overdraft fees.
The Labour MP is concerned that residents in Bury, Tottington and Ramsbottom might still be paying excessive fees on unarranged overdrafts, some of which may still cost seven times more than a payday loan according to new research from Which?
“The FCA has scrutinised this conduct, but not enough has been done to protect consumers in Bury and elsewhere from these sky-high fees. I have joined 83 colleagues from across all parties to demand action to end this unfair practice by restricting unarranged overdraft charges to the same level as arranged overdrafts.”
Which? first raised the alarm over these fees in 2016, but new research shows the issue still exists.
The consumer champion 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, 13 of the banks investigated charged more than a payday loan company, and considerably more so in several cases.
The FCA previously capped payday loan charges, meaning that the cost of a loan in our scenario would be £24. Which? found:
- Santander is almost 7.5 times* higher and £155 more expensive, charging its customers a massive £179 over 30 days.
- TSB is over 6.5 times more costly, charging £160.00.
- This is followed by HSBC and First Direct – over 6 times higher, at £150.
- RBS and Natwest are £144 and 6 times higher.
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. We must see urgent action to restrict these charges, bringing them into line with arranged overdraft fees to finally end this unfair practice.”