Economy

Overdraft fees to become cheaper for millions of Brits after FCA intervention

Overdraft fees to become cheaper for millions of Brits after FCA intervention”

These rules will come into effect in April 2020 and will change the nature of overdraft facilities in the United Kingdom significantly.

Additionally, there will no longer be higher fees for unarranged overdrafts than arranged ones, the UK's finance regulator said.

Further reforms published today, include the requirement for banks and building societies to help customers compare overdrafts by using an April when advertising arranged overdrafts, pricing overdrafts more simply using an annual interest rate and ensuring refused payment fees reasonably reflect the costs of declining the actual payments.

- Requiring banks and building societies to do more to identify customers showing signs of financial strain or in financial difficulty, and put strategies in place to reduce repeat overdraft use.

This has impacted not just the pockets of many United Kingdom bank account holders, but also many peoples' credit ratings; as they fail to repay an unarranged overdraft immediately, the charges roll on, costing them more and impacting their chances of getting credit, mortgages, getting access to future finance and even the money they may need to borrow to renovate their existing home (more information). Andrew Bailey, its chief executive, said: "Vulnerable consumers are disproportionately hit by excessive charges for unarranged overdrafts, which are often ten times as high as fees for payday loans".

Bailey said it was a radical set of measures that would make overdrafts fairer, simpler and easier to manage.

Banks made over £2.4billion from overdraft fees in 2017, with around 30% of that figure coming from unarranged overdrafts.

Most of the new rules will come into force by 6 April 2020, with some taking effect immediately.

"Consumers can not meaningfully compare or work out the cost of borrowing as a result of complex and opaque charges, that are both a result of and driver of poor competition".

He added: "The decisive action we are taking will give greater protections to millions of people who use an overdraft, particularly the most vulnerable".

"The changes can't come soon enough".

New bank rules have been announced.

She said: "Today's interventions from the FCA are long overdue".

Previous research showed those aged between 35 and 44 were most likely to have some form of overdraft, and about 10% of all 18 to 24-year-olds had exceeded their overdraft limit in the previous 12 months.

"We would always urge customers to speak to their bank and arrange an overdraft in advance to ensure payments are honoured".



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