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Responding to the Financial Conduct Authority's announcement on reforms to the overdraft market, Eric Leenders, Managing Director, Personal Finance at UK Finance said:
The banking industry is committed to helping customers manage their money and we will be working closely with the FCA to implement these rules. The industry is working on a voluntary agreement to make the cost of overdraft borrowing easier to understand for consumers which will be implemented in April 2020. This will build on the range of measures already introduced by the industry, such as text alerts which have been shown to reduce overdraft charges by 25 per cent. Overdrafts can provide a convenient way for customers to smooth their short-term cashflow, and there is a highly competitive market in the UK with over 96 products on offer. We would always urge customers to speak to their bank and arrange an overdraft in advance to ensure payments are honoured.
The banking industry is committed to helping customers manage their money and we will be working closely with the FCA to implement these rules.
The industry is working on a voluntary agreement to make the cost of overdraft borrowing easier to understand for consumers which will be implemented in April 2020. This will build on the range of measures already introduced by the industry, such as text alerts which have been shown to reduce overdraft charges by 25 per cent.
Overdrafts can provide a convenient way for customers to smooth their short-term cashflow, and there is a highly competitive market in the UK with over 96 products on offer.
We would always urge customers to speak to their bank and arrange an overdraft in advance to ensure payments are honoured.
<ol start="1" type="1"><li>UK Finance is the collective voice for the banking and finance industry. Representing more than 250 firms across the industry, we act to enhance competitiveness, support customers and facilitate innovation.<br /> </li> <li>Banks have introduced a range of measures to help make customers aware that they might be about to reach their agreed limit and help them understand the charges that they might incur, as well as providing support and product features to help minimise any charges:<br /><ol start="1" type="a"><li><strong>Text alerts and prompts</strong>: To help customers avoid unnecessary charges, text alerts and mobile apps will inform customers who are about to enter into an unarranged overdraft and give them the opportunity to take action to avoid incurring charges. FCA <a href="https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2F74n5c…; has identified that customers using alerts and mobile apps had a 24 per cent reduction in their fees.</li> <li><strong>Retry periods for regular payments</strong>. When there is insufficient money in an account to pay a regular payment, customers will be contacted and given an opportunity to pay in during the same working day so that the payment can be made.</li> <li><strong>Fee free buffers for small overdrafts</strong>: To help customers avoid any potential charges, many banks have developed products that allow a fee free overdraft buffer, within which no overdraft fees are charged. Most current accounts have a minimum overdrawn balance (£10 - £20) below which a charge is not applied.</li> </ol></li> </ol><ol start="3" type="1"><li>The Personal Current Account market in the UK is highly competitive, with 96 accounts offering overdrafts currently listed by MoneyFacts: <a href="https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2F74n5c…; <br /> </li> <li>5.1 million customers having taken advantage of the Current Account Switching to move their account and find the best deal since it was set up. <a href="https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2F74n5c…; </ol><p>The voluntary agreement developed by the industry will be implemented by April 2020 in line with the other FCA pricing remedies</p>
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