The Financial Conduct Authority (FCA) has today set out proposals to change the way banks charge for overdrafts, along with other measures in its latest update on high cost credit.
The proposals include banning banks from charging more for unarranged overdrafts than arranged overdrafts, ending fixed daily or monthly charges, and requiring more action to identify customers in financial difficulty.
Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “This is a significant and welcome shake-up of the way overdrafts work, and we are pleased that the FCA is taking strong action to protect consumers.
“Putting an end to fixed charges and higher pricing for unarranged overdrafts should significantly reduce costs for people who use this form of borrowing. At National Debtline we see that repeated overdraft use is often a sign of wider financial problems – and the regulator is right to also require banks to do more to identify and help these customers.
“However, the option of introducing a price cap should remain firmly on the table. The FCA should set a clear end date at which it will review the impact of these new measures in bringing costs down, and must be prepared to introduce a price cap if required.”