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02/09/2004
Banks slammed for 'exorbitant' overdraft charges
The consumer magazine Which? has called for banks to get rid of "exorbitant unauthorised overdraft rates and fees", after a survey for the publication found that banks charged £3 billion to customers for unauthorised overdrafts last year.
Which?'s new survey reveals that one-in-four people used an unauthorised overdraft in the last 12 months. Almost two thirds of these people had done so more than once.
Which? said that the it was not just people managing their money badly who were suffering - those who make a genuine mistake are being heavily penalised, too, it said.
The survey cited the example of one bank which charged £95 for an unauthorised overdraft of £50 for three days.
And, in the latest Which? members' survey, three-out-of-five current account holders had no idea what interest rates or fees they'd be charged for an unauthorised overdraft.
Which? said it would like to see all banks follow the lead of Alliance & Leicester and HSBC, which now charge the same rate for unauthorised overdrafts as they do for authorised overdrafts - Alliance & Leicester charges 6.9% and HSBC charges 14.8%.
The biggest charges can be incurred when a transaction such as a cheque or direct debit takes an account over its limit. For example, Barclays and NatWest charge £25 for each transaction, even if it isn't paid. The Big Four all charge customers £30 for unpaid cheques and standing orders.
Malcolm Coles, editor, Which?, said: "Unauthorised overdrafts are a goldmine for banks - the charges they levy are way out of proportion. It's especially unfair on customers who only occasionally run up a small unauthorised overdraft for a short time. We're calling on banks to stop punishing these customers by giving them a few days' grace to pay back an unauthorised overdraft before charges are levied."
(gmcg/mb)
Which?'s new survey reveals that one-in-four people used an unauthorised overdraft in the last 12 months. Almost two thirds of these people had done so more than once.
Which? said that the it was not just people managing their money badly who were suffering - those who make a genuine mistake are being heavily penalised, too, it said.
The survey cited the example of one bank which charged £95 for an unauthorised overdraft of £50 for three days.
And, in the latest Which? members' survey, three-out-of-five current account holders had no idea what interest rates or fees they'd be charged for an unauthorised overdraft.
Which? said it would like to see all banks follow the lead of Alliance & Leicester and HSBC, which now charge the same rate for unauthorised overdrafts as they do for authorised overdrafts - Alliance & Leicester charges 6.9% and HSBC charges 14.8%.
The biggest charges can be incurred when a transaction such as a cheque or direct debit takes an account over its limit. For example, Barclays and NatWest charge £25 for each transaction, even if it isn't paid. The Big Four all charge customers £30 for unpaid cheques and standing orders.
Malcolm Coles, editor, Which?, said: "Unauthorised overdrafts are a goldmine for banks - the charges they levy are way out of proportion. It's especially unfair on customers who only occasionally run up a small unauthorised overdraft for a short time. We're calling on banks to stop punishing these customers by giving them a few days' grace to pay back an unauthorised overdraft before charges are levied."
(gmcg/mb)
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