Following publication of the FCA’s high cost credit review, Tashema Jackson, money expert at Uswitch.com, says: “It is encouraging to hear that FCA is looking to tackle some of the most expensive forms of debt that consumers can access, in particular as those who are reliant on overdrafts, door-step loans and rent-to-own agreements tend to be the most vulnerable, with limited access to cheaper forms of credit elsewhere.
“For overdrafts in particular, these proposals could prevent people from slipping into debt in the first place, but they do very little to help persistent overdraft users – those who know they are going to use their overdraft, or those who are never out of theirs. This is where the banks must do more. It is not acceptable for lenders to be making millions of pounds every month from vulnerable customers who are trapped in their overdraft. Our research shows that one in six consumers depend on their overdraft, with an average debt of more than £800 and only once those consumers have been helped to escape their ‘overdraft reliance’, will they really be able to benefit from the FCA’s proposals.
“An important area for the FCA to consider is around the complexity of overdraft charges. At the moment it is near impossible for a prospective customer to compare the different costs, as while some banks charge a daily fee others will calculate the cost as a percentage of the overall debt. In order to create more transparency, the regulator should make it simpler for customers to see exactly what the cost of having an overdraft is, and ensure that the banks are displaying this in a straightforward and consistent manner.
“For consumers who are really struggling don’t feel you need to do so alone. Speak to your bank and see if they can help. If you are still concerned, charities such as StepChange offer free and impartial advice to help get your debt under control.”
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Uswitch is the UK’s top comparison website for home services switching. Launched in September 2000, we help consumers save money on their gas, electricity, broadband, mobile, TV, and financial services products and get more of what matters to them. Last year we saved consumers over £373 million on their energy bills alone.
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