for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up
Wealth

Cable says banks ripping off consumers

Business Secretary Vince Cable gestures during his speech at South Bank University in London July 15, 2010. REUTERS/Stefan Wermuth

LONDON (Reuters) - Banks are ripping off their customers by not being upfront about the charges they levy on personal overdrafts, Business Secretary Vince Cable says in a TV documentary to be aired on Monday.

Cable criticised hidden charges levied by lenders in a BBC Panorama programme which found interest charged on unauthorised overdrafts was as much as 167 percent.

The same report said banks are demanding an average 32 percent interest on authorised borrowing, despite rates being advertised at around 19 percent.

“Consumers have been ripped off, get a very bad deal, are affected very much by the complexity of a lot of financial transactions that are not transparent,” Cable said.

Christine Ross, head of financial planning at SG Hambro -- the private banking offshoot of French bank Societe Generale SOGN.PA -- which examined the cost of overdrafts for the programme, urged consumers to read the fine print on their account details.

“What we found is that unless individuals really scrutinise the small print, the overdraft rates charged are far higher than they could even imagine,” she said.

The British Bankers Association (BBA) countered that overdrafts were not designed as vehicles for long-term borrowing and said banks had no desire to hide the cost of borrowing from their customers.

Cable also warned big retail banks that changes planned in the wake of the financial crisis will have to include more protection for consumers.

“One of the negative side effects of this crisis is that our banking system ... is now even more concentrated so there’s less competition, less choice and bigger temptation for banks to earn margins at the expense of their customers,” he said.

Reporting by Stefano Ambrogi; Editing by David Holmes

for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up