Understanding the ground realities of lending rates and more
Stockton, CA -- (SBWIRE) -- 03/07/2016 -- While a lot has been said about payday loans and how they lead to a debt cycle for consumers, the high overdraft rates from financial institutions often go unnoticed. Recent reports have suggested that an overdraft with a bank in the UK can cost users as much as payday loans.
According to a study conducted by a consumer organization, an overdraft of £100 on a checking account could easily cost a customer between £20 and £30 for a 31 day period. For the same period, payday loans will end up costing users £20 to £37. In case of unauthorized overdrafts, the rate can go up to the actual amount that has been borrowed. Hence it's not difficult to realize that it's time to take measures to ensure that the consumers are not shortchanged, so to speak.
The group, backed with this information, has urged the Financial Conduct Authority (FCA) to prohibit excessive charges in consumer credit industry. Reports from London Telegraph also add that the group has asked for a cap on default charges. According to Richard Lloyd, executive director of Which?, "While the regulators and government have focused on practices of payday lending, they also need to consider cleaning up the entire credit market. The High Street bank overdraft charges have to be looked into as well."
He believes that it is time regulators focused on exorbitant charges and irresponsible lending patterns to ensure that consumers are treated fairly. But the finance industry is contesting such claims, with Anthony Browne of the British Bankers Association saying that the overdraft charges have been dramatically reduced in the last few years. It has led to clients saving up to £1 billion in fees.
Browne asserts that consumers should make the most of the new regulations to choose the account that is suited to their needs rather than focusing on features that they won't use. "We encourage customers to shop around and get best deals, which is made easier by the switching service," he adds. The FCA has indeed taken certain measures to protect consumers in the credit industry. The number of times a payday lender rolls over a loan, and adding risk warnings on customer applications, are some of them, which users can do well knowing about.
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