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 facility.
It means from April banks will not be able to charge higher fees for the 14 million who have no
overdraft facility.
"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.
OVERDRAFTS 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.
Limit check and recurring bill payment
overdrafts fees to an amount that is reasonable and proportional to the financial institutions costs in providing the
overdraft coverage.
(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.
