The Financial Conduct Authority is introducing new regulations covering bank overdrafts, bringing in the end of higher rate fees for accidentally dipping over any agreed overdraft limit. The hope is it'll lower the £2.4bn the banks make in fees each year, with 30 per cent of that coming from high charges for unarranged overdrafts.
Banks uses these "unarranged" borrowing arrangements to charge much higher interest rates and daily fees, with the FCA saying that the unlucky few who routinely bounce along the bottoms of their bank accounts pay the most in fees -- just 1.5 per cent of customers contribute 50 per cent of the banks' total unarranged borrowing income.
That heaps shame on us all says the FCA, which is set to ban the charging of daily or monthly charges when borrowing, and wants this replaced by a standard, universal interest rate. The banks are also being asked to look at their refused payment fees to make sure they reflect the actual costs involved in bouncing a payment, rather than a nice plump number that's been pulled out of the air by head office.
The FCA's boss Andrew Bailey said: "These changes would provide greater protection for the millions of people who use an overdraft, particularly the most vulnerable." [FCA]