Which?, a U.K.-based consumer group, and a cross-party group of 84 MPs are taking on bank overdraft fees, demanding the Financial Conduct Authority (FCA) require banks to charge the same rages for unarranged overdrafts that they do for arranged overdrafts. According to Which?, the rates charged by banks in some cases are up to seven times higher than the fees charged on payday loans in the United Kingdom.
Which?’s investigation looked at the cost of borrowing £100 for 30 days at 16 mainstream banks and determined that in 13 out of 16 cases, it was more costly than it would have been to have used a payday loan company.
Santander was found to be the most expensive overdraft — charging £179 — seven times as much as the maximum £24 chargeable by a payday loan company due to FCA imposted caps.
Santander has said it will remove fees on unarranged overdrafts for its paid current accounts from July.
But Santandar was not alone; TSB, HSBC, First Direct, Royal Bank of Scotland and NatWest all charged rates on unassigned overdrafts that were six times higher or more.
Lloyds Banking Group came out with the lowest charge of £4.20, as the bank had already gotten rid of unarranged overdrafts.
“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,” Gareth Shaw of Which? told the Financial Times.
The FCA had already committed to looking into overdraft fees as part of an upcoming report on high-cost credit.
The regulator has said that it is considering a “fundamental reform” of overdraft charges.