Research conducted by consumer group Which? has found that a loan of £100 will cost the borrower £156!
These are charges that are added to your account when you borrow more than your limit will allow. They compared the charges to payday loan companies and found that banks charge seven times more than the £24 charged by a payday loan company!
Findings state that borrowers could end up paying as much as £180 on a £100 loan. NatWest charge £180 to borrow a £100 loan over a 30 day period. The bank has responded by stating: “Customers should contact us immediately if they know that they need money they haven’t been authorised to borrow. We provide several solutions such as extending their overdraft which costs less than borrowing without permission.”
NatWest also went on to state, “Unauthorised borrowing of £10 or less is does not incur a charge, we will send customers an alert reminding them to add funds to their account to avoid charges.”
In 2015, payday loan charges where capped as part of an initiative to assist people in avoiding the debt cycle.
The Financial Conduct Authority (FCA) will soon begin to regulate high cost credit; this will include pawnbrokers, payday lenders, overdraft facilities, as well as companies providing rent to own household items.
Director of campaigns and communications for Which Vickir Sheriff has stated: “It is unfair that people who are already struggling with their finances should be put into more financial difficulty. It is even more shocking that large financial institutions are charging more than small creditors, it doesn’t make any sense.”
She went on to state: “The FCA should use this opportunity to cap these exorbitant charges and make sure that banks are restricted from charging more for an unauthorized overdraft, the charges should be the same as a normal overdraft.”