UNARRANGED overdraft charges are a problem according to Citizen’s Advice Bureau (CAB), but their bigger concern is the level of the charges.
As Mike O’Connor, chief executive of Step Change explained in an interview last year, charging someone for using unarranged overdraft while already in a financial crisis can push the person in a cycle of debt.
Tom Togher, chief officer of CAB in Salford, says: “The Citizens Advice service has been campaigning that charges should be better regulated – in terms of the scale of them, for many years.
“We think that these borrowing fees should be much better controlled, and should reflect the cost of lending – not be a penalty.”
He adds: “If someone is struggling to keep within their budget each month, the last thing they need is to face charges that lead to even more pressures next month.
“If people do face these charges, they should ask their bank to review them, and if they refuse they should consider making a compliant to the financial services ombudsman.”
It is now being called by debt charity, StepChange, for banks to abolish unarranged overdraft charges.
Over two million people were constantly overdrawn in 2016, having to borrow from the banks every month, according to StepChange’s research.
Money from overdrafts tends to be for the necessities, such as food and other household bills, or living costs.
A total of 79 per cent of the charity’s clients were constantly in their overdrafts for a year before they sought out help and advice.
There are also calls to abolish unnaranged overdraft charges. Banks are now responsible to help their customers get out of their overdrafts in affordable ways.