Calls for banks to end overdraft charges
Experts warn banks to stop overdraft charges for fear of an ongoing ‘vicious cycle of borrowing’. According to industry figures in The Guardian, over 2 million people in the UK are in permanent overdrafts.
The charity StepChange, set up to help those in debt, has said they have uncovered evidence of unaffordable lending given to those in financial difficulty because banks insist on giving customers large overdrafts, even though they may not be able to afford the repayments. The charity’s report gave an example of one of its clients being offered an overdraft of £2,250, even though they were working part-time and on benefits. Half of StepChange’s clients have overdrafts and each owe an average of £1,722. They often use their overdrafts to pay off household bills, so end up in this cycle of debt.
Lloyds has already abolished charges for unplanned overdrafts and customers of Barclays cannot get an unauthorized overdraft. But others, including Royal Bank of Scotland, NatWest and Santander still offer unplanned borrowing. Santander charges up to £95 for each month a customer is overdrawn. RBS, NatWest and HSBC charge £80 a month. Nearly 13 million people have been overdrawn in the last 12 months.
The Evening Standard states that ‘The Financial Conduct Authority is currently considering a ban on charges for unplanned overdrafts as part of its study into high cost credit, but it is not due to report it until next year.’