John McDonnell pledges crackdown on overdraft fees charged by high street banks
2 min read
Labour has promised to “end the misery of permanent debt” with a crackdown on overdraft fees charged by high street banks if it wins power.
Shadow Chancellor John McDonnell will today announce plans to cap the total amount banks can charge in costs, interest charges and declined payment fees if consumers end up in the red.
Labour said the plans - which would also cap the amount of interest consumers can be ordered to pay - would help some 2.7 million people who suffer from perpetual financial strain.
Under the proposals banks would be able to charge a limit of £24 a month for every £100 borrowed - equivalent to 0.8% a day - and recoup no more than 100% of the borrowed amount in interest.
The plans mirror the caps brought in to tackle the payday loan market in 2015, and would ease the debt burden on consumers by more than £233m a year, the party said.
Mr McDonnell argued: “Too many families are having to rely on borrowing just to get to the end of the month, and are facing huge costs from our high-street banks.
"The national scandal of the low paid debt trap has to end. More needs to be done to level the playing field and bring greater fairness in consumer finance.
“Labour will end the misery of permanent debt and extend the cap on borrowing charges to overdrafts.”
Labour said almost 3 million people rely on bank overdrafts to cover essential spending, and that charges can be up to four times higher than equivalent costs when borrowing from payday lenders.
Michael Sheen, the actor and founder of the End High Cost Credit Alliance, has backed the Labour proposals.
He said: “High cost credit is more than just pay day loans, rent to own businesses or doorstep lending.
“Millions of people across the UK are also trapped in their overdrafts by extortionate rates of interest charged by reputable high street banks.”
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