Opposition to the government, the Labour Party, has pledged to introduce a cap on the total amount that can be paid in overdraft fees or interest payments.
Shadow Chancellor John McDonnell believed that this would help people caught in a “debt trap”, an approximate 2.7 million people stuck in their overdrafts. The move could help them save £86 ($118) a year on average.
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If this policy is implemented, regulators would impose a limit of £24 per month per £100 borrowed on any interest, fees and charges related to an overdraft.
McDonnell said: “The Tories’ rigged economy has seen real wages fall and insecure work multiply, whilst they hand out huge tax giveaways to the super-rich and the banks.
“Too many families are having to rely on borrowing just to get to the end of the month, and are facing huge costs from our high-street banks.”
He added: “The national scandal of the low paid debt trap has to end. More needs to be done to level the playing field and bring greater fairness in consumer finance.
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By GlobalData“Labour will end the misery of permanent debt and extend the cap on borrowing charges to overdrafts. We’ll also introduce a £10 an hour real living wage, and build an economy that works for the many, not the few.”
This isn’t the first cap the Labour Party has proposed recently. In September 2017, Labour stated they would cap the amount of interest that credit card borrowers could be forced to repay. In theory, nobody would pay more in interest than the principal borrowed on their credit card.
