UK banks told to explain 40% overdraft rates

Britain’s financial watchdog is demanding that major banks explain why they have set virtually identical overdraft rates of 40% in response to new rules. The Financial Conduct Authority has banned excessive and confusing overdraft fees, after its investigation concluded the overdraft market was dysfunctional and caused “significant harm” to the most vulnerable customers. It found high street banks charged fees for unarranged overdrafts that were 10 times the cost of a payday loan.

The FCA said its changes had put an end to high unarranged charges, saving typical borrowers up to £55 a month on an unarranged overdraft of £100 over seven days. Banks have also been asked to come up with a strategy to reduce repeat use of overdrafts, and to report on its effectiveness after six and 12 months. More than half of banks’ unarranged overdraft fees came from only 1.5% of customers in 2016.

Source: The Guardian
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