By Jason Theodorou
Business Secretary Vince Cable has said that British banks are 'ripping off' their customers, and argued that making banks change their ways would be a priority of the coalition government. Mr. Cable told the BBC's Panorama programme that a more competitive system.
Panorama have conducted an investigation which shows that high street banks are charging up to 167% interest on unauthorised overdrafts, while authorised overdrafts charged an average interest rate of 32% - despite advertising a rate as low as 19%.
Mr. Cable said: 'One of the negative side effects of this crisis is that our banking system that was already very concentrated is now even more concentrated, so there is less competition, less choice and a bigger temptation for banks to earn margins at the expense of their customers'.
The Business Secretary said that consumers were at a disadvantage, in a marketplace made up of a few major companies. Barclays charged £500 for an unauthorised overdraft, while the Bank of Scotland charged an interest rate of arond 365%. The Bank of Scotland is owned by Lloyds Group, who received £20 billion in the Government bailout of the banking industry. Halifax allegedly charges an annual rate of interest of 3,650% on the minimum overdraft.
The bonus culture was also singled out as a contentious issue. Mr. Cable said: 'The bonus culture which continues is unacceptable.. the coalition agreement makes it very clear that unacceptable bonuses are continuing, and that is something we want to try to stop, and that reflects the lack of moral compass'.
A spokesman for the British Banker's Association (BBA) said: 'Overdrafts are not designed for long term borrowing. They are a service to customers needing occasional, short term help with cash flow'.
'Anyone who finds themselves in the position of needing regular overdraft facilities, or where the borrowing is going on over many months, should seek help from their bank with budget planning or advice on what type of loan would best suit their circumstances'.
The BBA also said that most customers only used their overdraft as an emergency cushion, and when they did go overdrawn they stayed within agreed limits.
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