FCA Bans Fixed Fee Overdraft Charges

Changes to overdraft fees and doorstep lending have been proposed by the Financial Conduct Authority (FCA) and new policies should be in place by June 2019.

The FCA is looking into making banks reduce high overdraft fees and unarranged borrowing fees.  They will also look at catalogue credit, store cards and doorstep lending and helping consumers using these have more protection.

In 2017 over £2.4 billion was made by banking groups from overdrafts, 30% from unarranged overdrafts.

The FCA will be addressing the following:

• No fixed fees for overdrafts.
• Overdrafts to have a single interest rate, no monthly or fixed daily charges.
• Any overdraft fees will be clear including APR charges so consumers can compare to other products.
• Help and guidance for consumers showing financial strains to reduce their overdraft usage.
• Reducing high charges on un arranged overdrafts.

The FCA has already introduced ways for banks and building societies to help consumers understand:

• Overdraft charge calculators showing pounds and pence to interest rate.
• Cash machine alerts to tell you that you may be charged for using your overdraft and showing overdrawn balances.
• Shopping around for cheaper overdraft facilities.

Andrew Bailey, Chief Executive of the FCA said:  “These are important changes and will give consumers a better understanding of their overdraft and clear guidance on fees and how to manage your overdraft, with better protection policies in place”.