UK: FCA clamps down on overdraft charges and high-cost lending

The Financial Conduct Authority (FCA) steps in to tackle high-cost lending following an extensive review of the sector.

Bank overdraft charges, rent-to-own operators, door-step lending and catalogue credit and store cards are all areas likely to see drastic reform from the UK’s financial watchdog, as part of its plans to protect vulnerable consumers.

Stating that over 3 million UK consumers use high-cost credit, the FCA intends to release a substantial package of reforms aimed at benefiting these users.

Such measures include: introducing online tools to make overdraft costs more clear, mobile alerts warning of potential overdraft charges, new mechanisms to assess eligibility for overdrafts, and a ban on referring to overdrafts as “available funds”.

In addition, the FCA is considering imposing a cap on rentto- own merchants, who offer a form of hire purchase for big-ticket items such as washing machines and electric cookers, as has been recently implemented on payday loans.

These newly proposed measures will undergo consultation before being implemented, in the hope that such measures will be introduced by April 2019.

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