Overdrafts can be as costly as payday loans - Which? and BBA

[Legal Beagles]

Overdraft charges for customers have fallen significantly in recent years. The Office of Fair Trading estimates that customers are now up to £1 billion better off due to reductions in these fees.

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BBA Chief Executive, Anthony Browne said:

"Overdraft charges for customers have fallen significantly in recent years. The Office of Fair Trading estimates that customers are now up to £1 billion better off due to reductions in these fees.
“The higher figures quoted by Which? are based on extreme examples of unauthorised overdrafts. This is not a form of borrowing that we would ever recommend.
“We always encourage customers to shop around to get the best deals and the recently launched switching service makes it easier than ever before. Banks compete vigorously for business and customers should take full advantage of this competition to get the bank account that’s best for them.”

[Amethyst]

Re: Commenting on the figures published by Which?

He is talking about figures published by Which? http://www.which.co.uk/news/2013/10/...campaign.oct14

It's time to clean up credit Overdrafts can be as costly as payday loans

14 October 2013
We're calling on the Financial Conduct Authority to set tough rules on credit lenders.



Which? is today launching a new campaign to clean up the entire credit market after our research found that other forms of credit can be as expensive as payday loans.
The payday loans market has rightly attracted criticism for some of the worst practices in the credit market, but our research has found that in some cases using an authorised or unauthorised overdraft with your bank can be just as expensive.
Help us clean up the credit industry – share your experience of borrowing money.
Payday loans versus unauthorised overdrafts

Borrowing £100 for 31 days will cost £30 with a Halifax authorised overdraft or £20 with some Santander accounts, and borrowing the same amount for the same time with a payday loan company costs between £20 and £37.
Our research also shows that people can rack up sky high charges if they use an unauthorised overdraft and be hit with high interest and charges if they stay in their unauthorised overdraft for long periods.
With the Halifax Reward current account and the Santander Everyday Account it can cost £100 in charges for going £100 into an unauthorised overdraft for a month.
FCA credit regulation plans should go further

The Financial Conduct Authority’s (FCA) proposed new rules to clamp down on lenders won’t cover high penalty and default fees for payday loans, overdrafts and other high-cost credit products.
Which? thinks this is a major omission and has launched the Clean Up Credit campaign calling on the FCA to crack down on poor lending and unscrupulous practices across the whole market.
We want to hear from consumers about their experiences of using credit, and we will share this with the FCA to encourage it to set tougher new rules.
Payday loan charter

Which? is also fully supporting Paul Blomfield MP's Charter to Stop the Payday Loan Rip-off. The Charter will set out a number of recommendations to ensure the payday loan sector is treating borrowers fairly.
Richard Lloyd, Which? executive director said: 'The Government and regulators have rightly focused on the scandal of payday lending, but they must not lose sight of the urgent need to clean up the whole of the credit market. High street bank overdraft fees can be just as eye-watering as payday loans.
'Consumers need the credit market to work competitively. It's time to clamp down on excessive charges and irresponsible lending, and to make sure borrowers are being treated fairly whatever form of credit they’re using.'

[Amethyst]

Re: Commenting on the figures published by Which?

I like Which?'s thinking on this one...very clever. Not convinced that tactic will work, but nice effort. Downside of the comparison is it could possibly convince people that payday loans are a viable alternative to arranged overdrafts - however unintentionally Which? have put it across.

[Guest]

Re: Commenting on the figures published by Which?

I like Which?'s thinking on this one...very clever. Not convinced that tactic will work, but nice effort. Downside of the comparison is it could possibly convince people that payday loans are a viable alternative to arranged overdrafts - however unintentionally Which? have put it across.

This has always been an argument proffered by PDL companies. The fact of the matter is that if pay day loans were only available for those with access to current accounts there would not be as much of a problem.

We all know that the target clientele for these loans lies among those who have no alternative but to borrow from them, it is not a matter of choice.