Illegal Overdraft Fees Make Banks a Killing

28 million people in the UK have an overdraft with their bank, with an increasing number regularly using the facility as a necessity rather than for short-term borrowing according to a report by uswitch. This has given the UK a collective overdraft of over £10bn.

Britain’s personal debt now stands at £1.2 trillion and is making huge profits for the big banks.

3.5 million people are permanently overdrawn, some 39% relying on their overdraft to buy their food and 14% to pay their rent or mortgage. These people are at a high risk of going over their agreed overdraft limit, making them subject to hefty charges from their bank.

Customers are usually given a ‘penalty’ of about £30 for going over their agreed limit, which soon snowballs as a number of other charges including those for bouncing cheques, declined direct debits and standing orders are added. This is then spiraled by the incredibly high interest rates applied to the unauthorised borrowings.

Banks are making a very big profit from these charges, with an estimated £3bn generated every year just from unauthorised overdraft fees, which is raising concerns at the Office of Fair Trading (OFT). This is highlighted by figures: complaints to banks have risen by 50% to 3,500 in 2005, the majority of complaints about high interest rates and excessive charges.

The OFT said in an April ruling that banks were only justified in charging the amount it costs to cover the administrative cost of dealing with defaults, making their current charges excessive.

A number of consumer groups consider these charges illegal and are urging victims of these penalty charges to demand their money back with the threat of small claims court action.

Jamie Carruthers, author of the ‘ ReclaimYourMoney.co.uk/ Reclaim Your Money’ Guide to Claiming Back Illegal Overdraft Fees

ReclaimYourMoney.co.uk/ www.ReclaimYourMoney.co.uk