UK: FCA claims overdraft fee cap insufficient for current account concerns

In a recent report by the FCA, it was stated that a fundamental reform of unarranged overdrafts is needed. The FCA’s report follows the controversial introduction of a cap on the amount an individual can be charged for short-term, high-cost loans, such as payday loans. This cap will remain in place, as the FCA states that unarranged overdrafts for current accounts can cost significantly more than payday lending. FCA Chief Andrew Bailey is quoted by the Telegraph as saying, “maintaining the status quo is not an option” in relation to unarranged overdrafts for consumers.

"RFi Group data indicates the extent of consumer overdrafts, with 34% of customers having overdrawn their current account in the last 12 months."

In relation to the findings on payday loans, he is again quoted as saying “we are pleased to see clear evidence of improvement in the payday lending market after a period when firms’ treatment of customers and their business models were often unacceptable”. RFi Group data indicates the extent of consumer overdrafts, with 34% of customers having overdrawn their current account in the last 12 months, with 20% of those who have overdrawn doing so 6 times or more.

 

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