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StepChange Debt Charity has called on banks and the Financial Conduct Authority (FCA) to tackle unaffordable lending, as new research finds two million people are stuck in a constant cycle of persistent overdraft debt.
Group Editor
The charity’s new report, Stuck in the Red, found evidence of unaffordable lending in the overdraft market. It 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 report, based on a major qualitative survey of the charity’s clients and new analysis of FCA data, found that two million people in the UK used their overdraft every month in 2016.
The charity said 49.8 percent of its clients have overdraft debt and the majority are using it to pay for essentials and household bills, and that they are at risk of building up more significant debts through the rapid accumulation of interest and charges.
StepChange has therefore made a series of recommendations aimed at breaking the cycle of persistent overdraft debt and the harm it causes. These include:
Peter Tutton, head of policy at StepChange, said: “Fundamental reform is needed. There has been positive action from some banks to make charging structures clearer and to abolish unarranged overdraft charges.
“Lenders and regulators must take action 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.”
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