It always seems to happen. My day starts off quite serenely and then before I know it, a huge story breaks and my best-laid plans go out the window as I go on TV and radio to bring Which?’s fight for consumers out to the wider world.
Last week was no exception. The moment the Financial Conduct Authority, the UK’s financial watchdog, announced its clampdown on high-cost credit I was out talking to news channels, including a lovely 15 minutes on air with Vanessa Feltz, discussing what this meant for consumers.
To be perfectly honest, I was pretty irate. I’ve been a financial journalist for a decade now, and can distinctly recall the first time I published an investigation into unplanned overdraft fees – the charges you get hit with when you tip over the borrowing limit you’ve pre-agreed with your bank.
Back in 2011, we found that no-one understands overdraft fees; the charges are disproportionately high compared to the amount being borrowed; and that banks were ripping off consumers, milking the worst off to bulk up their profits.
Things aren’t much better. Last month, Which? revealed that nearly a dozen high streetbanks charge more than a payday lender to borrow from an unplanned overdraft.
The FCA’s own research laid bare the issue. Banks and building societies coined in £2.3 billion in overdraft fees in 2016 alone, 30 per cent of which was from unplanned overdrafts.
Banks make, on average, £2.50 for every £1 they lend out in this way. Some 13 million people use unplanned overdrafts, spending four months in them on average. And the FCA explicitly says that people in deprived areas pay twice as much as those living in less deprived areas.
The FCA first announced it was taking a look at overdraft fees almost 18 months ago. This was after the Competition and Markets Authority, a different regulator, spent years looking at the banking sector and said action needed to be taken on overdraft fees. Which was seven years after the Office for Fair Trading, a now-defunct regulator, tried to tackle overdraft fees.
Years and years of investigations into this market and still no action to truly put an end to these rip-off charges.
Yes, banks have been forced to cap the total amount they can charge in any one month, but that can still be as high as £80. Compare that to a payday loan, which has had the price of borrowing £100 in a month capped at £24.
So, in the face of all of this history and a clear problem in the market, to be out and about talking about why there still hasn’t been any action to tackle these exorbitant fees was frustrating to say the least.
The FCA is introducing measures to make costs clearer, and force banks to send notifications when they’re getting close to the borrowing danger zone. But this is tinkering around the edges – what needs to happen is radical action to help beleaguered borrowers trapped in a cycle of debt as soon as possible.
Which? has called for unplanned overdraft fees to be brought into line with planned overdraft charges since 2016, making it clearer and fairer for consumers. It’s a proposal that has the support of some 84 parliamentarians and is a sensible, proportionate way to help consumers without forcing a similar stringent cap as the one applied to payday loans.
Lloyds Banking Group – with 22 million customers – took this step last year, scrapping all of its unplanned overdraft fees. And to give a modicum of credit (forgive the pun), the FCA has said that it wants to explore this – banning daily charges for overdrafts and forcing banks to charge a simple interest rate. But after 18 months, it says it has to go away and crunch the numbers, put out another consultation, feed this into another review of the banking sector and give more opportunities for banks and building societies to argue against this solution and potentially water it down.
All the while, millions of people will continue to get hit with these fees. The kicking of the can on overdraft fees has to end. If this watchdog has got any teeth, it will see an end to rip-off overdraft charges this year.
I don’t want to be doing anymore interviews on this topic in 2019, or 2020, no matter how enjoyable it was in the booth with Ms Feltz.
Gareth Shaw is head of Which? Money Online