A campaign has been launched today urging the Government to crack down on all forms of credit and stop banks and plastic card companies – not just payday lenders – ripping off borrowers with excessive charges.
Consumer group Which? claims its research has found that overdrafts from high street banks can be just as expensive as payday loans.
For instance, borrowing £100 for 31 days will cost £30 with a Halifax authorised overdraft or £20 with some Santander accounts, while borrowing the same amount for the same time with a payday loan company costs between £20 and £37.
The research also revealed that, similar to rolling over a payday loan, people can rack up sky high default charges if they use an unauthorised overdraft and be hit with high interest and charges if they stay in it 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.
Earlier this month the Financial Conduct Authority announced proposed new rules for payday lenders which will come into effect from April next year. But Richard Lloyd, Which? executive director, said government and regulators “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.”
He added: “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”.
The move comes as Labour MP Paul Blomfield tomorrow launches a new cross-party charter – in conjunction with debt, consumer and anti-poverty organisations including Which? and Citizens Advice – that will set out recommendations to ensure the £7.5bn payday loan and doorstep lending sector is treating borrowers fairly.