Although banks insist that they provide simple and clear charges, recent research indicates otherwise. According to a research that was done by consumer group, it was discovered that the fees charged by banks for overdrawing facilities were quite high like those imposed by payday lenders. Additionally, people had to incur high default charges if they made use of unauthorised overdraft facility. Critics also indicate that the borrowing arrangements offered by banks are quite expensive.
The Consumer group that conducted the research cited several examples of these high charges. If you borrowed £100 for a period of 31 days, it will cost £30 if you use a Halifax authorized overdraft and you will have to incur £20 if you make use of certain Santander accounts.
However, if you were to borrow the same amount of money with a payday loan company like Wonga or Quickquid for a period of one month, it would cost you between £20 and £37. For clients who use the Santander Everyday Account and Halifax Reward Account, if you have an unauthorized overdraft for a period of one month, it can even cost you £100
The research Findings by Consumer Group come after tougher actions are being set for the payday loans industry in addition to the entire credit market being subjected to supervision the following year by the Financial Conduct Authority.
Quite recently, Finance Conduct Authority announced various measures that they were planning to impose on payday loans lenders including that the lenders should put a risk warning when advertising the payday loans offered by the company. Additionally, FCA is planning to put an end to poor lending practices and that in case of default by the borrower, the default charges should be a reflection of the actual costs that the lender will incur. FCA is also planning to put an end to lenders increasing the credit limits of clients without the client requesting for the increase.
Richard Lloyd an executive director however indicated that although the plan the regulators had of dealing with the payday lending problem was commendable, the government could not forget to clean up the entire credit market.
According to British Bankers’ Association CEO Antony Brown, overdraft charges had decreased tremendously over the recent years and that the figures quoted by the research company were based on unauthorised overdrafts that he would not recommend. Santander on the other hand indicated to Sky News that their overdraft charges were simple and easy for any customer to understand.