British minister roasts 'rip-off' banks

19th July 2010, Comments 0 comments

Britain's Business Secretary Vince Cable accused banks on Monday of "ripping off" customers with hefty overdraft interest rates as he vowed the government would restructure the banking system.

Cable spoke out after a BBC investigation found that banks were charging an average 167 percent interest rate on unauthorised overdrafts.

The BBC also found banks were demanding an average 32 percent interest on authorised overdrafts, despite advertised rates of around 19 percent.

"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," Cable said.

He said the financial crisis had led to less competition among banks and institutions were more reluctant to lend to customers.

"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's less competition, less choice and bigger temptation for banks to earn margins at the expense of their customers."

Halifax customers had complained to the BBC about its one pound per day flat fee on overdrafts of 10 pounds or above, meaning an effective annual interest rate of 3,650 percent on a 10-pound overdraft.

Halifax said in a statement that customers "want a clear overdraft charging structure" and their one-pound charge represented "a simply set of daily fees".

Cable, 67, made a name for himself as the Liberal Democrat party's finance spokesman with his analysis of the economic downturn.

He landed the business portfolio in the Conservative-Liberal Democrat coalition government.

© 2010 AFP

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