BANK CUSTOMERS should be given similar protections to payday loan borrowers when it comes to charges, according to Leeds West MP Rachel Reeves.
Ms Reeves called for the amount banks can charge for overdrafts to be legally capped, arguing it was unfair customers could be charged £5 a day for going a few pence into the red.
The law was changed four years ago to limit the charges payday loan companies can impose on customers.
The former shadow work and pensions secretary told MPs: “Millions of people are struggling with spiralling debts and overdrafts.
“They deserve to be protected from excessive charges and rip-off practices that only make their situations worse.
“We have seen from the payday loan cap that this can be achieved. “
Speaking in the Commons. Ms Reeves said the charges faced by consumers for going overdrawn were “totally disproportionate to the offence committed”.
She told MPs that customers could quickly rack up high charges for going overdrawn because penalities were imposed on a monthly basis rather than for the number of days in the red.
MPs heard about the case of a 42-year-old man who fell into financial difficulties after losing his job and saw his overdraft debt rise by more than £1,000 because of interest and charges.
A 38-year-old woman went just £90 into the red as she tried to manage financial commitments after getting divorced but charges and interest took the sum to more than £1,000.
Ms Reeves said: “Last year banks made £1.2 billion from charges on unauthorised overdrafts, mostly from financially vulnerable customers.
“These are customers who banks should be helping, not pushing further into the red. These are customers who the Competition and Markets Authority has labelled in its report a “captive audience” for the banks and their ‘uncomfortably high’charges.”
She added: “Action needs to be taken.”
Ms Reeves presented a Bill to change the law but the General Election will stop it making progress.