Banks ought to finish all unauthorised overdraft fees as a result of they’re trapping individuals in persistent debt, the monetary charity StepChange has stated.
The organisation additionally needs banks and regulators to do extra to determine individuals caught up in a “vicious cycle of borrowing”.
Even the place clients have admitted they’re in hassle, it stated banks typically fail to assist.
In 2016 some 2.1m individuals used their overdraft each month of the yr.
The UK’s largest financial institution, Lloyds, has already abolished expenses for unplanned overdrafts.
Clients of Barclays can’t get an unauthorised overdraft, however they will apply for “emergency lending”.
Nevertheless others, together with Santander, Royal Financial institution of Scotland (RBS) and NatWest nonetheless supply unplanned borrowing.
Santander fees as much as £ninety five for every month a buyer is overdrawn. RBS, NatWest and HSBC have a cap of £eighty a month.
As a part of its research into excessive value credit score the Monetary Conduct Authority (FCA) stated it was contemplating a ban on costs for unplanned overdrafts – however it isn’t resulting from report till 2018.
Half of StepChange’s shoppers have overdrafts and every owe a mean of £1,722.
They typically use their overdrafts to repay family payments, so find yourself in a cycle of debt.
Moreover banks insist on giving clients giant overdrafts, regardless that they could not be capable of afford the repayments, the charity claims.
Considered one of its shoppers was provided an overdraft of £2,250, although they have been working half-time and on advantages.
It says such banks are responsible of “unaffordable lending”.
“Lenders and regulators should take motion to wish to make sure that overdraft lending is reasonably priced, that debtors in monetary problem get the appropriate help and that we break the cycle of persistent overdraft debt,” stated Peter Tatton, head of coverage at StepChange.
“Elementary reform is required. There was constructive motion from some banks to make charging buildings clearer, and to abolish unarranged overdraft expenses.”
Shoppers additionally complained that even once they advised their financial institution about their monetary difficulties, little was completed to assist them.
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