MP joins forces with Which? to end rip-off overdraft fees
East Renfrewshire MP, Paul Masterton has joined forces with consumer champion, Which?, and over 80 fellow parliamentarians in signing a letter asking for the Financial Conduct Authority (FCA) to bring an end to rip-off overdraft fees.
The Conservative Member of Parliament is concerned that residents in East Renfrewshire might still be paying excessive fees on unarranged overdrafts, some of which may still cost over seven times more than a payday loan according to new research from Which?
Despite scrutiny from the regulator, Mr Masterton feels not enough has been done to protect consumers from these sky-high fees.
MP for East Renfrewshire, Paul Masterton 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.”
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.
Now, Which? has written a letter to the FCA along with 84 MPs from all the main parties, demanding the Financial Conduct Authority takes urgent action to end this unfair practice by restricting unarranged overdraft charges to the same level as arranged overdrafts.
The Competition and Markets Authority set out to tackle the issue by introducing a monthly maximum charge for unarranged overdrafts in August last year - but the measure has clearly failed to stop banks from charging sky-high rates. Meanwhile, the FCA has previously pledged to tackle the problem, but has delayed consulting on much-needed interventions, leaving people still facing these exorbitant fees.
Since Which? first called for banks to lower their unarranged overdraft fees, the Lloyds Banking Group has acted on its calls and scrapped unarranged overdraft fees, meaning it now has the lowest charges of investigated banks - £19.80 cheaper than a payday loan at just £4.20. Meanwhile, Santander has also committed to Which?’s calls and will remove fees on unarranged overdrafts for its paid current accounts from July this year – although this will not apply to other Santander accounts. Which? and parliamentarians are now calling for other banks to urgently follow suit.