‘After 10 years there’s finally an end to unfair bank charges’
Martin: ‘After 10 years, finally an end to unfair bank charges’
Martin Lewis, founder of MoneySavingExpert.com, said: “It’s taken a decade but this announcement by the FCA seems to finally mean the end to unfair bank charges for going beyond your overdraft limit.
“In 2005 we launched template letters to reclaim unfair bank charges – over six million people downloaded them, and more than £1 billion was paid back. Yet in 2009 the Supreme Court kiboshed the reclaiming on a technicality (it didn’t rule that bank charges were fair, just that fairness rules didn’t apply), and while that felt like a loss at the time, ultimately it was the direct catalyst for a rapid reduction in overdraft charges – which culminates in today’s announcement.
“Many people believe credit cards are bad and debit cards are good. But debit cards are debt cards too for the millions who are overdrawn – and this is often a far more expensive type of debt, sometimes even at a higher effective rate than payday loans. Many of those who are overdrawn are still a big provider of profits, subsidising banks to allow free banking to those in credit.
“As well as an end to charges, the FCA is right to try and crack down on the misty, unclear, difficult-to-compare world of overdrafts. While its solutions aren’t exactly what we were calling for, and it hasn’t imposed a total cost cap, at least forcing all banks to charge via an interest rate and stopping penalties for unarranged overdrafts will make it easier to compare – though I still worry many will struggle to work out exactly how much they’ll pay for their overdraft.
“Yet while ease of comparison is useful, it won’t help the many people who are already overdraft prisoners be able to switch. Some people’s overdrafts are facilitated to grow over time by their bank. That leaves them with a big debt and unable to move elsewhere, as the new bank will usually have a much lower limit. More work needs to be done to make the sector more competitive, with cheap switching deals that match existing overdraft limits.”