Halt overdraft charges now! Thousands of families facing job losses


Money Mail today calls on the big banks to put off overdraft charge hikes and waive fees as the nation battles deadly coronavirus. 

High-Street banks are poised to increase interest rates to as much as 50 per cent, which means many struggling households will have to pay more to borrow. 

This is despite the fact that the cost of borrowing for banks is at a record low, and after billions of taxpayer cash was used to bail them out in the last financial crisis. 

High-Street banks are poised to increase interest rates to as much as 50 per cent, which means many struggling households will have to pay more to borrow

As the coronavirus pandemic threatens to plunge millions of Britons into hardship, consumer experts have backed our call for banks to give borrowers respite. 

We want to see the rate rises, due from April 6, delayed, and charges to be waived completely over the next three months. 

Baroness (Ros) Altmann, former pensions minister, says: ‘I am fully behind the Money Mail campaign to see banks lower or completely abolish overdraft charges for the next three months. 

‘Banks have been helped so much since 2008 so surely it is their turn to step up to help their customers during this emergency.’ 

Borrowers face interest rates of up to 49.9 per cent if they slip into the red following a change of rules by the City watchdog. 

The Financial Conduct Authority (FCA) ordered the overdraft overhaul after fears vulnerable customers were facing ‘disproportionately high’ fees. 

Under the new rules, banks and building societies are required to introduce a simple interest rate charge so borrowers understand what being overdrawn is costing them. 

But the charges mean many customers, who have an overdraft facility agreed with their banks, could pay more. 

Yet these charges come as the Bank of England last week cut the base rate to a historic low of 0.1 per cent. 

Borrowers face interest rates of up to 49.9 per cent if they slip into the red following a change of rules by the City watchdog

Borrowers face interest rates of up to 49.9 per cent if they slip into the red following a change of rules by the City watchdog

And with fears the Covid-19 pandemic could trigger a global recession, experts fear many households could now be penalised if they are forced to use their overdrafts more in the months to come. 

Many banks have already said customers hit by the virus can get a three-month break from mortgage payments, those with ordinary loans can also delay payments, and some non-payment fees have been waived too. 

Only HSBC has said customers will get a £300 interest-free overdraft buffer for the next three months. Collectively, Britons are already about £6.7billion deep in overdraft debt, and experts say this figure will soon rise. 

Laura Suter, personal finance analyst at investment firm A J Bell, says: ‘The timing of the overdraft rate hike, just as people are going to be ramping up their debt levels in order to be able to afford the essentials, means the amount we’ll all be paying in overdraft interest is set to soar.’ 

Banks scrap rewards for switching accounts 

HSBC, RBS and NatWest have all pulled their cash rewards for customers who switch to their current accounts. 

HSBC withdrew its £175 bonus for customers switching to Premier or Advance accounts yesterday, as well as its £75 bonus for switches to its standard current account. 

It follows NatWest and RBS’s decision to pull its £175 bonus for current account switches last week. 

The banks say they are withdrawing the rewards so they can focus their attention on existing customers. 

NatWest’s offer was due to end next Thursday, while RBS’s was expected to finish on April 20. 

Meanwhile, both of HSBC’s offers were set to expire at the end of the month. Nationwide is still offering £100 to customers who refer a friend to the building society. 

The new customer will also receive £100 when they join. 

She says fees on overdrafts, and all consumer debt, should be waived to help those affected by the pandemic, and adds: ‘Given that the public stepped up to the plate when the banks were in peril in the last financial crisis, it feels like a logical move that the banks step in now to help the public in their time of need.’ 

Nationwide, Santander, HSBC, and TSB have announced rises of up to 39.9 per cent, while NatWest will charge up to 39.49 per cent, and Barclays 35 per cent. 

Lloyds has also said it will charge 39.9 per cent, but borrowers who are judged to be a higher risk face 49.9 per cent. 

Barones Altmann says the banks must listen. ‘Now is the time for banks to show concern for the position their customers will be in. 

‘They should immediately drop all overdraft and credit card interest rates to 0.5 per cent for three months. Starting today. 

‘The situation is desperate. It is hard to see how banks can justify having credit card interest rates at record high levels and overdrafts rates being increased to the kinds of rates that resemble payday lenders.’ 

The new charges, some of which are already in force, set out in an equivalent annual interest rate. This means interest is added to your debt monthly or daily at a level that would mean after a year you would be paying that advertised rate. 

Lloyds has also said it will charge 39.9 per cent, but borrowers who are judged to be a higher risk face 49.9 per cent

Lloyds has also said it will charge 39.9 per cent, but borrowers who are judged to be a higher risk face 49.9 per cent

So if you were a Lloyds customer and had to pay the top 49.9 per cent rate, you would owe an extra £499 if you stayed £1,000 overdrawn for a year. 

Personal finance expert Andrew Hagger, of website MoneyComms, welcomed HSBC’s move to cut overdraft bills. 

He said: ‘I’d like to see other banks match this as the absolute minimum. The FCA should look to work with the banks to slash these costs to help financially stretched and stressed consumers — even if it’s just for the next three months or so. 

‘These are extraordinary times and radical changes such as this, which give temporary respite from excessive charges should not be off the table.’ 

Anthony Morrow, of financial advice site OpenMoney, says: ‘Introducing eye-watering rates at a time where households are facing financial pressure because of the virus does not seem right. 

‘Overdraft charges are unfair and unjust at the best of times, let alone during an unprecedented period of uncertainty and unease.’ 

Other experts agree that banks could, at the very least, delay the fee hikes for three months. 

Rebecca O’Connor, personal finance specialist at insurer Royal London, says: ‘People will be depending on emergency debt facilities like never before over the coming days and weeks, through no fault of their own. 

‘No one wants to see people thrown into debt spirals they can’t escape or into the hands of payday lenders or loan sharks because they can’t afford the cost of going into the red.’ 

Banks made about £2.4billion from overdrafts fees in 2017 — 30 per cent of which came from unarranged overdraft users. 

The FCA currently has no plans to change the date the new rules come in to force. A spokesman for banking body UK Finance says: ‘The changes being introduced to overdrafts follow new rules from the FCA which firms must adhere to by April. 

‘While pricing decisions will be made by individual firms, all providers are ready and able to offer support to customers impacted directly or indirectly by Covid-19.’ 

Banks add many people using expensive unarranged overdrafts will pay less under the changes. 

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