Paisley and Renfrewshire South MP Mhairi Black has welcomed the news that the Financial Conduct Authority (FCA) have today banned banks from charging “rip-off” unarranged overdraft fees under new proposals. The FCA will ban fixed daily or monthly fees. They will also make banks advertise single interest rate overdrafts.
Research by Which? Showed that some fees that have been imposed by banks can make this form of debt more expensive than payday loans. Overdrafts costs can reach 10% a day while Payday loans are capped at 0.8%.
It was revealed that in some circumstances, High Street banks were charging ten times more than that of payday loans companies for unarranged overdraft fees, with those in some of the most deprived areas hit hardest. These findings were part of the UK regulator’s high-cost credit review and the impetus for fundamental new reforms on the way banks charge for overdrafts.
Mhairi Black MP had been a supporter of consumer watchdog Which? #EndRipOffOverdrafts campaign demanding that the financial regulator, the FCA, take urgent action to end this unfair practice by restricting unarranged overdraft charges to the same level as arranged overdrafts.
Mhairi Black MP said
“This is good news as the research was showing that incredibly some of these overdraft fees had actually been above the cap that has been put in place for payday loans. In many cases these charges had been penalising some of the poorest people, I welcome this decision today by the FCA.
“I was happy to support this campaign but we need to go further to make sure that banks and lenders are not leaving people in overpriced debt through borrowing especially when it is targeting people who are already struggling to make ends meet.
“This move by the FCA will come as a massive relief to many people in Renfrewshire who find themselves thousands of pounds out of pocket due to rip-off overdrafts every year.”