Fixed daily and monthly overdraft charges to be banned - MSE News

Former_MSE_Callum

Fixed daily and monthly overdraft fees are to be banned as part of a package of reforms proposed today by the financial regulator...

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'Fixed daily and monthly overdraft charges to be bannedE'

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fermi

"And it's also told banks to do more to identify overdraft customers who are showing signs of financial strain or are in financial difficulty, and to help them to reduce their overdraft use."

anfieldred

So does this mean Lloyds/Halifax etc. overdraft charges will change again? they're definitely not helping people reduce overdrafts

Paul_Herring

It has also proposed that arranged overdraft prices must be advertised in a standard way, including an annual percentage rate (APR)

though our main disappointment is it fails to impose the total cost cap

FCA playing whack-a-mole again. The banks will simply charge people more for other things to make up the difference in their bottom line, or refuse service to those who will make them a loss.

Like people who can manage their money for their current accounts; say hello to transaction fees and imposed current account monthly charges, without giving any credit interest on the same.

Increases in mortgage rates.

Dire interest rates on savings accounts to continue.

And more sinisterly, denial of credit to those who previously were able to get it (though clearly not managing it better.)

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Apart from those on pedestals who are dictating this and are getting a warm fluffy glow out of making such pronouncements (and the banks, of course,) who is supposed to win out of this? It clearly isn't the parts of the general pubic who can manage their money, nor those who can't; it's lose-lose for both of them.

fiestaman87

This is good news although it’s long overdue!

I wish this had been done 10 years ago when I was struggling with overdraft debt and paying £90-£120 per month (sometimes even more) with 2 accounts.

Thankfully after switching to an account with interest rates for overdrafts and no daily fees coupled with some severe financial discipline (and later a job promotion) I cleared the overdrafts and now even though I still have an overdraft facility I have not used it for a few years.

I hope this helps many more people out of an overdraft trap!

Merry Christmas all and a Moneysaving New Year.

D_M_E

This signals the end of free bank accounts - they have to make up their lost profits somewhere and charges for all bank accounts is the likely option.

badmemory

D_M_E wrote: »

This signals the end of free bank accounts - they have to make up their lost profits somewhere and charges for all bank accounts is the likely option.

I agree, they have been trying to do this for years, all they needed was a good excuse & this finally provides them with one. It isn't as if you can do what we used to & draw out a load of cash & walk round paying all your bills in cash, so they have us as a "captive audience". Transaction charges bigger than overdraft fees - here we come.

Uxb

Well the UK is pretty well unique in the world in not charging for the provision of banking services while in credit ...so expect us to fall in line with the rest.

Actually I'm surprised the EU has not banned free bank accounts by now on the grounds of well whatever excuse they have on any day - harmonization of banking services across Europe - how does that sound?

agrinnall

This is going to be one of those good ideas in theory that has unintended consequences that end up making things worse for many people. Two things spring to mind:


If all overdrafts have the same charge, what happens to student accounts that come with a free overdraft?


If unarranged overdrafts cost the same as arranged ones the banks will do one of two things: no unarraged overdrafts at all, with all payments beyond existing arrangements declined; or get rid of arranged overdrafts entirely and make them all unarranged at high rates.

One-Eye

Old system - you are slightly overdrawn and a council tax direct debit makes you even more overdrawn, leading to higher overdraft fees.

Wonderful new system - you are slightly overdrawn and your bank refuses to pay the direct debit for your council tax leading to refused payment bank charge. Council demands immediate payment for the whole year, and your only possible source of credit is a pay day lender or the council will take you to court and send in the bailiffs when you can't pay.

Paul_Herring

Well the UK is pretty well unique in the world in not charging for the provision of banking services while in credit ...so expect us to fall in line with the rest.

Rushing to the lowest common denominator is not always the best thing to do.

Not that the people dreaming up these patches (for that is what they are) to the financial system seem to care - they're 'fixing' the symptoms, not the underlying problems.

And as a result they will have something new to 'fix' 6 months down the line when other problems crop up (that they 'failed' to foresee) that they can 'solve' as a result of their current meddling.

Must be nice to be in a job where you can surreptitiously create problems that keep you employed for quite a while.