Graphs at a glance: Legal usury in the high street. How high street banks push people into the hands of payday lenders.

This graph produced by Bristol University's study on high cost lending shows the cost of borrowing £100 for one month in the form of:

a) a loan from a group of Payday lenders
b) an unauthorised overdraft from a group of high street banks
c) an authorised overdraft from a group of high street banks

Bristol University coyly declines to name the payday lenders and high street banks.

Cost of borrowing £100 for one month

However the report does provide a helpful link to Which?, showing the data from 2011, which does name them:

You might say charges reduced after all the fuss in the courts. You'd be right. According to an OFT report the cost of unauthorised loans dropped by two thirds between 2007 and March 2011. However the Which? report was in September 2011, so it takes into account the drop. Before that the banks' charges were even more ridiculous.

How charges dropped when banks were taken to court

You might say the difference is the 'unauthorised' loan is unauthorised. However the UK Supreme Court would disagree with you. In its judgement siding with the banks the Supreme Court stated of the charges:

"they were in fact part of the price or remuneration paid by the customer in exchange for the package of services which made up a current account"

These stonking fees were not 'punishment' for going outside the agreement, but were part of the agreement. Just like the gouging payday lenders.

The Office of Fair Trading likes to show its teeth every now and then. The British Bankers' Association, watching the OFT's teeth soaking in a glass with a fizzing steradent, expressed its gratitude: 

"We welcome the OFT's decision not to refer this issue to the Competition Commission and will continue to work with them to make further improvements for customers and the wider economy."

When the Archbishop of Canterbury speaking on Payday Loans in the House of Lords said he wanted to "cut out legal usury from our high streets", he should have extended his comments to include High street Banks. 

Banks decline authorised overdrafts to risky borrowers, leaving them with the option of an unauthorised overdraft. Taking a payday loan is a bad decision, until you consider the alternatives.