By Elliot Wright, 10th February 2010
Taxpayer-funded banks are slapping hard-up customers with fees
and interest equivalent to more than 3,000% a year, according to a
Daily Mail investigation.
This makes banks more expensive for short-term borrowing than
payday loan companies and dodgy back-street lenders where the
amount borrowed is often dwarfed by charges and interest.
State-backed Lloyds Banking Group offers the worst value for
money for customers slipping into unauthorised overdrafts. Lloyds
TSB charges a massive £216.32 for someone who goes overdrawn by
£150 for ten days.
While Halifax, also Part of the Lloyds group, charges £50, and
Barclays - which was not bailed out by taxpayers - has a charge of
£44.
According to the Daily Mail, these charges exceed those charged
by many of the controversial payday loan companies, which offer
short-term loans at astronomical rates of interest.
Lloyds TSB charges a massive £216.32 for
someone who goes overdrawn by £150 for ten days.
One such company, Speed-e-loan says its interest rate adds up to
3,142% a year for someone wanting to borrow £150 for ten days. But
providing the loan is repaid on time, the cost is actually £20.44 -
one-tenth of what Lloyds charge for unauthorised borrowing.
Chris Tapp, director at Credit Action, says: 'People don't
realise how expensive unauthorised overdrafts can be, as they don't
have to display the annual percentage rate (APR) which shows the
true cost of borrowing. When you talk about payday loans being a
cheaper form of borrowing, it is very jarring.
'If people could actually see just how much they cost, it would
give them much more incentive to stick within their budget. The way
the charges are levied can lead people into a spiral of debt, as
they get charges on charges. And these are not fringe lenders;
these are the High Street names, some of which we own.'
Not all the banks charge extortionate rates for unauthorised
borrowing. For the same amount borrowed over the same period, HSBC
charge a fraction of what Lloyds TSB do, with a 0.75p levy. While
building society Nationwide charge £20.78.
Marc Gander, from the campaigning Consumer Action Group, says:
'It's disgraceful that those who are struggling the most are hit
the hardest by these excessive fees. Where are the regulators to
ensure customers are treated fairly?'
Testimonial
"I just had to put pen to paper and write to say I'm more than delighted with my settlement that you won me back from my PPI I had with Lloyds TSB. The Claim Forms were simple to fill in. It was a breeze"
Mr R Evans 11 Nov 2010