Vince Cable says banks are ‘ripping off’ customers

Business Secretary Vince Cable has suggested that customers are being "ripped off" by banks after an investigation by the BBC's Panorama, which found that some people are paying interest of as much as 167 per cent on unauthorised overdrafts.

The documentary also found that banks are charging an average 32 per cent interest on authorised overdrafts, despite advertised rates of around 19 per cent.

Responding to the findings, Cable said: "One of the negative side effects of this [financial] crisis is that our banking system that was already very concentrated 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.

"When we talk about restructuring the banks what's going to come out of this is a more competitive system where the customers are not ripped off."

Halifax was singled out on Panorama by its customers who complained that they were being charged an effective interest rate of 3,650 per cent on a £10 overdraft. This is because the bank charges a flat fee of £1 a day on overdrafts, so customers who are only slightly in the red are charged disproportionately.

Halifax is owned by Lloyds, a recipient of £20bn of bank bailout money from the government in 2008.

Halifax said in its defence that its customers "want a clear overdraft charging structure" and the £1 a day represents "a simple set of daily fees".

Read a full report at BBC News.