Brendan O’Hara is one of 80 MPs who have joined forces with Which in calling for the Financial Conduct Authority (FCA) to bring an end to rip-off overdraft fees.
He is concerned that residents in his Argyll and Bute constituency might still be paying excessive fees on unarranged overdrafts, some of which may still cost over seven times more than a payday loan according to new research by the consumer organisation.
Despite scrutiny from the regulator, Mr O’Hara feels not enough has been done to protect consumers from these sky-high fees.
“It is quite astonishing that this practice is still going on with some of our high street banks and will undoubtedly hit those who can least afford it with making ends meet getting harder and harder for some families,” he said.
“The regulator must stop dragging its feet and bring an end to this consumer exploitation now.”
Which first raised the alarm over these fees in 2016, but new research shows the issue still exists.
The consumer champion compared the cost of borrowing £100 for 30 days in an unarranged overdraft across 16 high street banks with borrowing the same amount for the same length of time through a payday loan.
Overall, 13 of the banks investigated charged more than a payday loan company, and considerably more so in several cases.
The FCA previously capped payday loan charges, meaning that the cost of a loan in this scenario would be £24.
Which found:
- Santander is almost 7.5 times higher and £155 more expensive, charging its customers £179 over 30 days.
- TSB is over 6.5 times more costly, charging £160
- This is followed by HSBC and First Direct – over six times higher, at £150.
- RBS and Natwest are £144 and 6 times higher.
Meanwhile, Smile, Co-operative Bank, Yorkshire Bank and Clydesdale Bank are all five times more expensive, charging £120.
Now, Which has written a letter to the FCA along with Mr O’Hara and MPs from across the political spectrum, demanding the Financial Conduct Authority takes urgent action to end this unfair practice by restricting unarranged overdraft charges to the same level as arranged overdrafts.
Gareth Shaw, Which money expert, added: “These fees are particularly costly because bank charges apply to their monthly billing period, not the number of days the money is borrowed for, meaning customers can effectively be charged more for going across two charging periods.
“The Competition and Markets Authority set out to tackle the issue by introducing a monthly maximum charge for unarranged overdrafts in August last year – but the measure has clearly failed to stop banks from charging sky-high rates.”
Since Which first called for banks to lower their unarranged overdraft fees, the Lloyds Banking Group has acted on its calls and scrapped unarranged overdraft fees, meaning it now has the lowest charges of investigated banks – £19.80 cheaper than a payday loan at just £4.20.
Meanwhile, Santander has also committed to Which’s calls and will remove fees on unarranged overdrafts for its paid current accounts from July this year – although this will not apply to other Santander accounts.
Which and MPs are now calling for other banks to urgently follow suit.
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