Labour says it might cap the whole quantity anybody might pay in financial institution overdraft charges or curiosity repayments.
Shadow chancellor John McDonnell stated he needed to finish the “nationwide scandal” of low paid households trapped in debt.
Labour stated the coverage might assist 2.7 million people who find themselves caught with everlasting overdrafts, saving them the equal of £86 every per yr.
The Treasury stated it had already tightened the principles to guard debtors and cracked down on payday loans.
Mr McDonnell stated: “Too many households are having to depend on borrowing simply to get to the top of the month, and are dealing with large prices from our Excessive Road banks.
“The nationwide scandal of the low paid debt lure has to finish. Extra must be carried out to degree the enjoying subject and convey larger equity in shopper finance.”
In accordance with Labour, individuals caught with everlasting overdrafts use them greater than eighty five% of the time whereas incurring greater expenses.
The celebration additionally stated overdraft costs could possibly be as much as 4 occasions larger than the equal borrowing from payday lending.
Beneath the coverage, regulators would impose a restrict of £24 per thirty days per £one hundred borrowed on any curiosity, charges and expenses associated to an overdraft.
That may be equal to the present cap on payday mortgage curiosity expenses.
The proposal was welcomed by the actor and founding father of the marketing campaign group Finish Excessive Value Credit score Alliance, Michael Sheen.
The Frost/Nixon star, who’s a Labour supporter, stated: “Excessive value credit score is extra than simply pay day loans, lease to personal companies or doorstep lending.
“Tens of millions of individuals throughout the UK are additionally trapped of their overdrafts by extortionate charges of curiosity charged by respected excessive road banks.”
Banks say they’ve launched quite a lot of measures to assist clients keep away from going into their overdrafts and minimise any costs once they do.
These embrace accounts with “overdraft buffers”, through which no overdraft charges are charged, and alerts for patrons who’re about to enter into an unarranged overdraft.
The federal government has additionally taken steps to assist weak individuals in debt. Final yr it dedicated to introducing a six-week grace interval through which debtors can be shielded from enforcement proceedings and mounting curiosity expenses.
And in 2015, the Monetary Conduct Authority (FCA) imposed a cap on payday mortgage prices following criticism of lenders.
The FCA has additionally raised considerations about overdrafts and plans to seek the advice of on potential cures later this yr.
A Treasury spokesperson stated: “We all know that households can wrestle with debt. That’s the reason we have now tightened the principles to make sure that cash can solely be lent to individuals who can afford to repay.
“We have now additionally cracked down on payday loans, saving debtors over £150m a yr, and are introducing an power cap to assist individuals with family payments.”
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