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'Banks failing to support customers in financial difficulty,' says StepChange

Thursday, 7th December 2017

Over two million people in the UK are stuck in a constant cycle of persistent overdraft debt, according to a new report – ‘Stuck in the Red’ - by StepChange Debt Charity.

The report also highlights evidence of unaffordable lending in the overdraft market and cites cases where banks have failed to offer their customers a means to deal with overdraft debt, even when customers have made it clear they are in financial difficulty.

The common experience of the charity’s clients who approached their bank for support was negative. Those approaching their bank said that it failed to offer a suitable solution to help them deal with their overdraft debt and in many cases continued to add interest and charges despite having been made aware of the person’s difficulties. The report highlights good practice from banks including freezing interest and charges, offering affordable ways to repay and signposting to free debt advice.

Using overdrafts to pay essential household bills

The charity research also revealed bank overdrafts are the second most common type of debt they deal with, clients with this type of debt on average owe £1,722. What is of concern is that the charity says the vast majority of its clients are using their overdraft facility to pay for essentials and household bills.

This then potentially leads to further debts through the rapid accelerated interest and charges, more so with unarranged overdraft charges.

Peter Tutton, Head of Policy at StepChange Debt Charity, said: “Overdrafts are one of the most common credit products used in the UK. They are meant to be short-term, but our evidence shows that they can all too easily trap people in expensive and long-term cycles of persistent debt.

Lenders and regulators must take action to need to ensure that overdraft lending is affordable, that borrowers in financial difficulty get the right support and that we break the cycle of persistent overdraft debt”.

You can see the full report here ‘Stuck in the Red’




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