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|SMA report looks at interventions to help overdraft users|
|Wednesday, 10 August 2016|
The wide-ranging Competition & Markets Authority (CMA) investigation into retail banking was released earlier today. One of its key areas of intervention is aimed at personal overdraft users suffering from “competition failures” in the sector.
Commenting after the release of the CMA report, Alex Letts, CEO of the digital ‘unbank’ Ffrees, said: “In its provisional findings published in June, the CMA made the point that free-if-in-credit accounts are not in fact free.
“I wrote to the CMA to explain that banning the use of the word free would be the most productive move they could make, as it grossly distorts the competition playing field and misleads consumers. In some cases overdraft charges can hit more than £80 per month”.
“Now we have found that overdraft charges can in fact be even MORE expensive than payday loans.
“We know this contradicts what people expect, with one of our recent surveys2 showing the majority of Brits (40%) think an overdraft is the cheapest option for unsecured credit, followed by a credit card (33%) and finally a personal loan (24%). In fact it is quite the reverse.”
The research has analysed the cost of borrowing with banks, in both authorised and unauthorised scenarios, and compared this to the cost of borrowing the same amount with payday loan providers.
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