The loan industry has been getting negative press for many years now over responsible lending. Everybody knows there were a number of bad elements in the finance industry and now it’s governed by the FCA, lots of hard work has gone into removing these bad elements. This means customers really can have confidence in the company and products they are looking at when searching for a short term loan, payday loan or bad credit loan.
It now seems however the banks are getting put under the microscope with regards to unarranged overdrafts. These are similar to a one off pay day loan – you fall short paying a certain bill / Direct debit – the bank covers it for you and you pay it back on your next pay day, or when funds are next deposited in your bank.
The only thing is, there are 2 massively negative points about an unarranged overdraft that are even less spoke about;
1 – you get no choice of provider – your bank does this for you before you can shop around to get the best deal, meaning…….
2 – when you look at the charges most unarranged overdrafts incur, these can far outweigh those of a pay day loan.
Because of the media coverage of Pay Day loans compared to Unarranged Overdrafts, most people reading this would either not know, or disagree with the above statement – so let’s compare the two using a recent article in the “Money|Banking” pages in Telegraph Newspaper 20.05.2017
APR – If in excess by the minimum amount for 28 days and one missed transaction11376.60%651%
|Bank Name||Fee Free Buffer||Unauthorised Charges per month (if overdrawn without arrangement, or in excess of agreed overdraft)|
|Santander 123 A/C||£12||£6/Day – max £95 per month||9526%|
|Halifax||£50||£5/Day – Max £100 per month||2607%|
|NatWest/RBS||£10||£6/Day – max £90 per month plus £6 per unpaid transaction (up to a maximum of 10)|
|Lloyds Example 1||£10 – £25||For Overdrafts up to £25 – £6 fee plus £5 Fee / day – Max £40 per month (plus interest)|
|Lloyds Example 2||£25+||For overdrafts over £25, £6 fee plus £10/Day – max £80 per month (plus interest)||4171.42%|
|Minimum Amount||Shortest Period||APR for Shortest Period|
|QuidMarket||£300||4 Months||Representative 1297% APR|
As you can see, you’re able to borrow a whole lot more for a whole lot less when using a responsible lender like QuidMarket – which, when used correctly from time to time do prove to be a cost effective way of alleviating short term issues – paying that large winter gas bill – getting your car through the MOT – those unexpected shortfalls most of us experience from time to time.
Don’t let the negative press put you off or be embarrassed – how many of those people reading, or even writing those articles have an overdraft or credit card – just another cash bridge until payday, although a little more socially acceptable they are essentially a short term loan too.
FCA demands changes to unarranged overdraft fees
Charges for going on unarranged overdraft may be outlawed according to the Financial Conduct Authority. After expressed “clear concerns” in other areas, such as costly unarranged overdrafts and warned “fundamental changes” were necessary in the sector.
The FCA is considering banning unarranged overdraft fees, which penalise those people who go over the agreed amount, without prior permission of their bank, this can cost the consumer £6 per day, more than the short term high interest industry can charge after the cap was set by the FCA in 2015, this has saved over three quarters of a million customers around £150 million a year as a result of the change in law
According to Financial Consent Authority chief executive Andrew Bailey, “maintaining the status quo is not an option”. The review found that the costs of going accidentally overdrawn were often more punishing. ie, ‘significantly higher’, according to Bailey, than taking out a high APR loan with a payday lender.
Barclays have already abolished these charges, while Lloyds will scrap them as of November.
The Banking industry defended its self by stating that its to provide safeguards against going overdrawn, such as push notifications to customer’s phones and text alerts.
Eric Leenders head of personal banking a spokesman for UK finance stated that “When used sustainably, consumer credit is important for economic growth, and lenders work hard to ensure the balance is right between helping customers to borrow while ensuring longer term affordability,”