This month FCA stated they are making overdrafts simpler, fairer, and easier to manage and to protect the millions of consumers that use them. The changes represent the biggest overhaul to the overdraft market for a generation.
- 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 resonably 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
They also made changes to the Buy Now Pay Later (BNPL) sector, saving consumers around £40-60 million a year. This means:
- Firms cannot charge backdated interest on amounts of money that have been repaid by the consumer during the BNPL offer period
- Firms have to provide better information to consumers about BNPL offers, reflecting the risks as well as the benefits of the products
- Firms must give prompts to consumers, to remind them when the offer period is about to end