Which? is today launching a new campaign to clean up the entire credit market after our research found that other forms of credit can be as expensive as payday loans.
The payday loan market has rightly attracted criticism for some of the worst practices in the credit market, but our research has found that in some cases using an authorised or unauthorised overdraft with your bank can be just as expensive.
Help us clean up the credit industry – share your experience of borrowing money.
Payday loans versus unauthorised overdrafts
Borrowing £100 for 31 days will cost £30 with a Halifax authorised overdraft or £20 with some Santander accounts, and borrowing the same amount for the same time with a payday loan company costs between £20 and £37.
Our research also shows that people can rack up sky high charges if they use an unauthorised overdraft and be hit with high interest and charges if they stay in their unauthorised overdraft for long periods.
With the Halifax Reward current account and the Santander Everyday Account it can cost £100 in charges for going £100 into an unauthorised overdraft for a month.
FCA credit regulation plans should go further
The Financial Conduct Authority’s (FCA) proposed new rules to clamp down on lenders won’t cover high penalty and default fees for payday loans, overdrafts and other high-cost credit products.
Which? thinks this is a major omission and has launched the Clean Up Credit campaign calling on the FCA to crack down on poor lending and unscrupulous practices across the whole market.
We want to hear from consumers about their experiences of using credit, and we will share this with the FCA to encourage it to set tougher new rules.
Payday loan charter
Which? is also fully supporting Paul Blomfield MP’s Charter to Stop the Payday Loan Rip-off. The Charter will set out a number of recommendations to ensure the payday loan sector is treating borrowers fairly.
Richard Lloyd, Which? executive director said: ‘The Government and regulators have rightly focused on the scandal of payday lending, but they must not lose sight of the urgent need to clean up the whole of the credit market. High street bank overdraft fees can be just as eye-watering as payday loans.
‘Consumers need the credit market to work competitively. It’s time to clamp down on excessive charges and irresponsible lending, and to make sure borrowers are being treated fairly whatever form of credit they’re using.’