Banks to be banned from charging excessive fees for overdrafts 2 years ago

Banks to be banned from charging excessive fees for overdrafts

Banks made more than 2.4 billion pounds from overdraft fees last year

The Financial Conduct Authority (FCA) has branded the high-cost credit sector "dysfunctional" and is set to banks from charging excessive unarranged overdraft fees for customers.


The main focus will be on ensuring the price for each overdraft will be a simple, single interest rate rather than fixed daily or monthly charges that can pile up for overdraft users.

More than 50% of banks’ unarranged overdraft fees came from just 1.5% of customers in 2016, with those in deprived areas more likely to be affected.

Last year, banks made more than £2.4bn from overdrafts, with roughly 30% from unarranged overdrafts. In certain instances, these costs can be more than 10 times as high as charges for already-extortionate payday loans.

The FCA has, however, stopped short of setting a monthly price cap on overdraft charges.

Despite calls from charities and MPs, the FCA will not set a monthly price cap for fear of court action from banks.

It has also argued that it could prompt providers with low, or no, charges to raise prices, but said it would consider introducing a cap if it sees “signs that prices are becoming harmful”.


The FCA has also stated that banks must do more to identify customers who are in financial difficulty and to help them reduce their overdraft use rather than encourage it.