FCA confirms new overdraft requirements
On 7 June 2019, the FCA published Policy Statement 19/16 confirming that it is introducing reforms to the overdraft market with the aim of making overdrafts simpler, fairer and easier to manage.
The reforms include:
- Stopping banks and building societies from charging higher prices for unarranged overdrafts than for arranged overdrafts.
- Banning fixed fees for borrowing through an overdraft – calling an end to fixed daily or monthly charges, and fees for having an overdraft facility.
- Requiring banks and building societies to price overdrafts by a simple annual interest rate.
- Requiring banks and building societies to advertise arranged overdraft prices with an APR to help customers compare them against other products.
- Issuing new guidance to reiterate that refused payment fees should reasonably correspond to the costs of refusing payments.
- Requiring banks and building societies to do more to identify customers who are showing signs of financial strain or are in financial difficulty, and develop and implement a strategy to reduce repeat overdraft use.
The rules will come into force from 6 April 2020. The full policy statement can be read here: PS19/16
At the same time, the FCA published a consultation paper on its proposals to require firms to publish overdraft prices and fees as part of their current account information. The consulation paper can be accessed here: CP19/18
Responses are due by 7 August 2019.