Agreed OD costs Soar

[EXC]

''Banks hike interest rates on agreed overdrafts in move to claw back lost profits''

http://www.dailymail.co.uk/news/arti...t-profits.html

[enaid]

Re: Agreed OD costs Soar

Banks hike interest rates on agreed overdrafts in move to claw back lost profits

Banks were accused of a new rip- off yesterday - quietly putting up interest rates on overdrafts already agreed with customers.

A change in the small print has led to ordinary borrowers finding themselves saddled with charges of up to almost 20 per cent.

Most have little idea the rates have soared and will wonder why their overdrafts are costing far more than last year.

Read the small print: One bank said it was making 'great improvements' to overdrafts, but tucked away in the letter was a rate rise on agreed overdrafts
Banks are suspected of using the stealth tactic to claw back the millions they were forced to refund customers over excessive charges.

They used to demand little or no interest on overdrawn balances provided a customer did not go over an agreed limit. But recently, their rates have shot up - despite the Bank of England keeping interest rates on hold at 5 per cent.

An investigation by the Daily Mail reveals that in most cases it is now more expensive to use an agreed overdraft than to go on a spending spree with a credit card, which typically charges 15 or 16 per cent.

Liberal Democrat Treasury spokesman Lord Oakeshott has written to the Office of Fair Trading and the Financial Services Authority demanding action.

He said: 'This may not be technically illegal but it is the sharpest of sharp practices. Banks must not be allowed to screw their customers to make up for losses elsewhere.'

Internet and telephone bank First Direct told one customer last week it was again offering an overdraft of £1,500. But the new interest charge of 14.85 per cent - up from 10.9 per cent - was tucked away in the 22nd paragraph of the letter.

Barclays wrote to its 11million customers in July saying it was making 'great improvements' to overdrafts. But in the small print was a rate rise on agreed overdrafts from 15.6 to 17.9 per cent. On a £1,000 overdraft, this would equate to an extra £23 a year.

Most major banks are doing the same. Lloyds TSB is reckoned to be profiting to the tune of £23million from overdraft interest charges this year, according to comparison website uSwitch. Banks have generated an extra £52million in the last 12 months this way, says uSwitch.

Spokesman Mike Naylor said: 'We would recommend consumers . . . look to switch away from providers that start making sneaky changes.'

Bank customers already pay an estimated £4.6billion a year in current account charges.

The roll-call of shame also features Barclays, Halifax and the Bank of Scotland, the Royal Bank of Scotland and Nat West, the Abbey and HSBC. Only the Co-op, in our study, has lowered its rates.


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Money expert Martin Lewis said: 'Banks are not our friends, to help us out when we get into financial trouble. They are institutions out to make money for their shareholders.'

A spokesman for the British Bankers Association said: 'Banks offer a range of overdraft and lending products to suit customers' needs. They constantly review what they offer in the light of demand.'

Barclays said prior to the present increase it had not put up authorised overdraft rates since 2001.

A Lloyds TSB spokesman denied it was making £23million from the charges. 'This is not a figure we are familiar with,' he said.

'We cannot provide an alternative figure, as this figure is commercially sensitive

[Amethyst]

Re: Agreed OD costs Soar

Would have expected them to mention Abbey who have recently changed to charge unauthorised overdraft interest rate on the entire overdrawn balance as soon as you go a penny over the authorised limit.

[argentarius]

Re: Agreed OD costs Soar

Would have expected them to mention Abbey who have recently changed to charge unauthorised overdraft interest rate on the entire overdrawn balance as soon as you go a penny over the authorised limit.

I wasn't aware that any bank did otherwise. Once the overdraft balance is over the authorised amount, the entire overdraft is unauthorised and that would be the relevant rate.

[scoobydoo]

Re: Agreed OD costs Soar

No some banks charge a reduced rate for say the first £100 for example .