The FCA has vowed to shake up the "dysfunctional" overdraft
market - including stopping building societies and banks from charging more for unarranged overdrafts
than for arranged ones.
"I have a staff of people who take care of overdrafts
. I have to pay those people.
Fixed fees for borrowing through an overdraft
will also be banned - calling an end to fixed daily or monthly charges, and fees for having an overdraft
It means from April banks will not be able to charge higher fees for the 14 million who have no overdraft
"Our radical package of remedies will make overdrafts
fairer, simpler and easier to manage.
The new measures, which come into force from April 6, 2020, ban fixed fees for borrowing through an overdraft
, require banks and building societies to price overdrafts
by a simple annual interest rate and advertise overdraft
prices with an annual percentage rates to help customers compare them against other products.
It said the cost differences of providing the two overdrafts
did not justify the "much higher prices" for unarranged overdrafts
About 30 per cent came from unarranged overdrafts
, with most of that coming from just 1.5 per cent of customers in 2016.
UP TO PS1,500-ish: If your credit score isn't too bad, a nationwide.co.uk FlexDirect account gives a year's 0 per cent overdraft
Tashema Jackson, money expert at uSwitch.com, said: "Overdrafts
are an absolute essential part of consumers' everyday finances.
(129) Other big players in the financial industry have also changed their practices in the face of public scrutiny: Bank of America eliminated overdrafts
at the point-of-sale in 2011 and JPMorgan Chase assesses no overdraft
fees for transactions under five dollars.