Leeds West MP Rachel Reeves has held a meeting aimed at tackling the sky-high overdraft charges faced by thousands of cash-strapped borrowers.
Ms Reeves says she is pushing for urgent action to stop exorbitant overdraft fees with the introduction of a new cap on the maximum banks can charge in fees each month.
A recent survey from Leeds-based StepChange Debt Charity found that borrowers who slipped into unauthorised overdrafts were hit on average with extra charges of £225 a year.
According to StepChange and the Children’s Society, there are an estimated 3,844 children living in 2,204 families in Leeds West that are struggling with problem debt.
Regulators at the Financial Conduct Authority (FCA) are currently investigating high cost borrowing and the FCA’s chief executive, Andrew Bailey, was at the roundtable discussion in Leeds to hear about the issue as part of his visit to Yorkshire and the Humber.
Ms Reeves said:
“Far too many people are being ripped off when it comes to charges for overdrafts. These exorbitant fees make it even harder for them to get out of debt.
“This meeting is to look at ways of tackling this issue and other problems associated with high-cost credit.
“I want tough action taken to limit overdraft charges with the introduction of a fair monthly limit on the maximum amount banks can charge for overdrafts – rather than leaving it up to banks to levy whatever charges they want.
“The major banks make more than £1 billion a year on charges on unauthorised overdrafts, the majority of which is from financially vulnerable customers. That must stop.”
Commenting, Mike O’Connor, Chief Executive of StepChange Debt Charity said:
“Many of our clients are trapped in a cycle of overdraft debt as they struggle to make ends meet. Our research shows how people face a situation in which they are regularly hit with unauthorized overdraft charges, making it harder to get their finances back under control and deepening the hardship they face.
“Without action, hundreds of thousands of people are at risk of remaining stuck in this cycle. It is time for the FCA to intervene and set a cap on unauthorized overdraft charges, just as they set a cap on payday loans.”