Which? response to FCA overdraft research

Which? executive director, Richard Lloyd, said:

“The FCA investigation into overdrafts is a welcome first step towards putting people back in control of their credit.

“We have long called for the regulators to clamp down on excessive bank charges that hit hardest people struggling with their finances. And with some unauthorised overdrafts as costly as payday loans, we want to see charges made clearer so that people can compare different borrowing options more easily.”

 

Background:

 When the FCA took over regulation of consumer credit, we set out  five ways they should act to clean up the whole of the credit market and send a clear message to irresponsible lenders: Ban excessive default fees and charges, crack down on irresponsible lending, put people in control of their credit, clear and transparent information and swift and early intervention for people in financial difficulty.

Last month the Government responded to our calls to give consumers better data about their personal current account running costs, to help people compare banks. This information should make a big difference as people could be thousands of pounds worse off by having the wrong account.
AUTHORISED OVERDRAFTS

The cost of borrowing £100 for a month (a) (in £)
Halifax Reward Current Account

30
Santander 123 Account

20
Santander Everyday Account

20
Nationwide FlexDirect

16
NatWest Select Account

8
RBS Select Account

8
Bank of Scotland Classic

7
Lloyds Bank Classic

7
TSB Bank Classic

7
Barclays Bank Account

2
HSBC Bank Account

2
Co-operative Bank Current

1
Nationwide FlexAccount

1
Clydesdale Bank Current Account Plus

1
Yorkshire Bank Current Account Plus

1
First Direct First Account

0
UNAUTHORISED OVERDRAFTS

The cost of borrowing £100 for a month (a) (in £)
Halifax Reward Current Account

100
Santander Everyday Account

100
Santander 123 Account

95
NatWest Select Account

90
RBS Select Account

90
Bank of Scotland Classic

82
Lloyds Bank Classic

82
TSB Bank Classic

82
Clydesdale Bank Current Account Plus

52
Yorkshire Bank Current Account Plus

52
Co-operative Bank Current

22
HSBC   £2 based on this being the first time you’ve used the unauthorised overdraft in six months £2 – based on being the first time the unauthorised overdraft thas been used  in six months
First Direct £1 – based on being the first time the unauthorised overdraft has been used in six months
Nationwide FlexDirect

n/a
Barclays Bank Account

n/a
Nationwide FlexAccount

n/a
PAYDAY LOANS

The cost of borrowing £100 for a month (a) (in £)
Wonga.com (b)

37
The Money Shop (c)

30
Payday UK (c)

30
Quickquid (c) (d)

20-30
Cash Lady (e)

29

 

[a] Cost rounded to nearest £.
[b] 30 days
[c] Loan to your next payday, so period may be shorter than 31 days.
[d] Cost of credit depends on your credit rating.
[e] 28 days

 

Statement