Overdrafts: what issues should MSE be raising with the industry?

friolento

Bridlington1 said:

GeoffTF said:

MattMattMattUK said:

eskbanker said:

MattMattMattUK said:

How would the banks feel about the regulator removing the silly overdraft rules they introduced last year

Which ones?  I thought the last significant regulatory change was the one four years ago, or are you thinking of something falling within the consumer duty provisions?

I must be getting old, I thought it was only last year. The stupid rules that said banks could only charge a single interest rate, no fees or charges etc.

Banning unauthorised overdrafts would be good too.

I'd take the opposite view. Occasionally some people will dip into an unarranged OD only temporarily due to not wanting to keep money in a current account earning no interest and forgetting that a direct debit is about to be taken (I have done this myself in the past with a £2 Plum direct debit). In this instance the customer usually receives a text that morning alerting them that they've gone into an unarranged OD and then pays in funds to clear the full debt the same day before any fees are charged and no harm is done. I would argue going into the unarranged OD very briefly in these circumstances is preferable to having the DD bounce.

Totally agree. The current arrangements are working very well IMO.I always keep next to nothing in my current account, and occasionally go into an overdraft because of this. I get a text before 9am if it happens, and I then have until 8pm to get my current account back into a positive balance. All simple to resolve.

But not everybody can put their current account back into the black on the day, and I know many people who "live in" their overdraft. It's a big issue that not everyone understands that overdrafts are one on the most expensive ways of borrowing. I think it would be expecting too much from banks if they were meant to tell people there are cheaper alternatives. It's sites like MSE, and hopefully schools, where people are / should be taught about the pros and cons of overdrafts, loans and credit card debts.

TheBanker

friolento said:

Bridlington1 said:

GeoffTF said:

MattMattMattUK said:

eskbanker said:

MattMattMattUK said:

How would the banks feel about the regulator removing the silly overdraft rules they introduced last year

Which ones?  I thought the last significant regulatory change was the one four years ago, or are you thinking of something falling within the consumer duty provisions?

I must be getting old, I thought it was only last year. The stupid rules that said banks could only charge a single interest rate, no fees or charges etc.

Banning unauthorised overdrafts would be good too.

I'd take the opposite view. Occasionally some people will dip into an unarranged OD only temporarily due to not wanting to keep money in a current account earning no interest and forgetting that a direct debit is about to be taken (I have done this myself in the past with a £2 Plum direct debit). In this instance the customer usually receives a text that morning alerting them that they've gone into an unarranged OD and then pays in funds to clear the full debt the same day before any fees are charged and no harm is done. I would argue going into the unarranged OD very briefly in these circumstances is preferable to having the DD bounce.

Totally agree. The current arrangements are working very well IMO.I always keep next to nothing in my current account, and occasionally go into an overdraft because of this. I get a text before 9am if it happens, and I then have until 8pm to get my current account back into a positive balance. All simple to resolve.

But not everybody can put their current account back into the black on the day, and I know many people who "live in" their overdraft. It's a big issue that not everyone understands that overdrafts are one on the most expensive ways of borrowing. I think it would be expecting too much from banks if they were meant to tell people there are cheaper alternatives. It's sites like MSE, and hopefully schools, where people are / should be taught about the pros and cons of overdrafts, loans and credit card debts.

Actually part of the 'new' rules mentioned above require banks to contact customers who are regularly using overdrafts to highlight cheaper ways of borrowing (and indeed ways of not borrowing at all, e.g. budgeting advice)

Nasqueron

MattMattMattUK said:

eskbanker said:

MattMattMattUK said:

How would the banks feel about the regulator removing the silly overdraft rules they introduced last year

Which ones?  I thought the last significant regulatory change was the one four years ago, or are you thinking of something falling within the consumer duty provisions?

I must be getting old, I thought it was only last year. The stupid rules that said banks could only charge a single interest rate, no fees or charges etc.

Ah you mean the one MSE and Martin made a big deal about because fees were unfair and switching to interest rates would obviously lead to competition among lenders and not say all of them whacking up the rates as high as they could and all at the same level? One of Martin's more naïve campaigns to say the least

jimjames

GeoffTF said:

MattMattMattUK said:

eskbanker said:

MattMattMattUK said:

How would the banks feel about the regulator removing the silly overdraft rules they introduced last year

Which ones?  I thought the last significant regulatory change was the one four years ago, or are you thinking of something falling within the consumer duty provisions?

I must be getting old, I thought it was only last year. The stupid rules that said banks could only charge a single interest rate, no fees or charges etc.

I thought those rules were sensible. Banning unauthorised overdrafts would be good too.

I don't think that's a good idea at all. With the current rules I can keep all my money in a savings account and only need to pay it into my current account when a bill hits and it goes overdrawn. If they were banned I would have to keep money in it. There is no cost to me as the bank informs me if I go overdrawn and can clear it by 2.30pm

GeoffTF

jimjames said:

GeoffTF said:

MattMattMattUK said:

eskbanker said:

MattMattMattUK said:

How would the banks feel about the regulator removing the silly overdraft rules they introduced last year

Which ones?  I thought the last significant regulatory change was the one four years ago, or are you thinking of something falling within the consumer duty provisions?

I must be getting old, I thought it was only last year. The stupid rules that said banks could only charge a single interest rate, no fees or charges etc.

I thought those rules were sensible. Banning unauthorised overdrafts would be good too.

I don't think that's a good idea at all. With the current rules I can keep all my money in a savings account and only need to pay it into my current account when a bill hits and it goes overdrawn. If they were banned I would have to keep money in it. There is no cost to me as the bank informs me if I go overdrawn and can clear it by 2.30pm

I was assuming that most people can get an arranged overdraft for that purpose. Of course the bank can refuse, but I do not expect that they would then allow an unauthorised overdraft. The Nationwide Flex account, for example, does not allow unauthorised overdrafts. Banning unauthorised overdrafts, would give the customer more certainty.

jimjames

GeoffTF said:

jimjames said:

GeoffTF said:

MattMattMattUK said:

eskbanker said:

MattMattMattUK said:

How would the banks feel about the regulator removing the silly overdraft rules they introduced last year

Which ones?  I thought the last significant regulatory change was the one four years ago, or are you thinking of something falling within the consumer duty provisions?

I must be getting old, I thought it was only last year. The stupid rules that said banks could only charge a single interest rate, no fees or charges etc.

I thought those rules were sensible. Banning unauthorised overdrafts would be good too.

I don't think that's a good idea at all. With the current rules I can keep all my money in a savings account and only need to pay it into my current account when a bill hits and it goes overdrawn. If they were banned I would have to keep money in it. There is no cost to me as the bank informs me if I go overdrawn and can clear it by 2.30pm

 The Nationwide Flex account, for example, does not allow unauthorised overdrafts. Banning unauthorised overdrafts, would give the customer more certainty.

Nationwide operate the same system I mentioned above, you get a message that your account doesn't have sufficient funds and can pay in enough to cover by 2.30pm to stop going overdrawn.

Nasqueron

jimjames said:

GeoffTF said:

jimjames said:

GeoffTF said:

MattMattMattUK said:

eskbanker said:

MattMattMattUK said:

How would the banks feel about the regulator removing the silly overdraft rules they introduced last year

Which ones?  I thought the last significant regulatory change was the one four years ago, or are you thinking of something falling within the consumer duty provisions?

I must be getting old, I thought it was only last year. The stupid rules that said banks could only charge a single interest rate, no fees or charges etc.

I thought those rules were sensible. Banning unauthorised overdrafts would be good too.

I don't think that's a good idea at all. With the current rules I can keep all my money in a savings account and only need to pay it into my current account when a bill hits and it goes overdrawn. If they were banned I would have to keep money in it. There is no cost to me as the bank informs me if I go overdrawn and can clear it by 2.30pm

 The Nationwide Flex account, for example, does not allow unauthorised overdrafts. Banning unauthorised overdrafts, would give the customer more certainty.

Nationwide operate the same system I mentioned above, you get a message that your account doesn't have sufficient funds and can pay in enough to cover by 2.30pm to stop going overdrawn.

Ditto NatWest, think it's 3pm from memory (bloomin Santander taking DD days early!)

MSE_James

Just a word of thanks from us at MSE Towers for everyone's thoughts in this thread 

GeoffTF

jimjames said:

GeoffTF said:

jimjames said:

GeoffTF said:

MattMattMattUK said:

eskbanker said:

MattMattMattUK said:

How would the banks feel about the regulator removing the silly overdraft rules they introduced last year

Which ones?  I thought the last significant regulatory change was the one four years ago, or are you thinking of something falling within the consumer duty provisions?

I must be getting old, I thought it was only last year. The stupid rules that said banks could only charge a single interest rate, no fees or charges etc.

I thought those rules were sensible. Banning unauthorised overdrafts would be good too.

I don't think that's a good idea at all. With the current rules I can keep all my money in a savings account and only need to pay it into my current account when a bill hits and it goes overdrawn. If they were banned I would have to keep money in it. There is no cost to me as the bank informs me if I go overdrawn and can clear it by 2.30pm

 The Nationwide Flex account, for example, does not allow unauthorised overdrafts. Banning unauthorised overdrafts, would give the customer more certainty.

Nationwide operate the same system I mentioned above, you get a message that your account doesn't have sufficient funds and can pay in enough to cover by 2.30pm to stop going overdrawn.

If you have an arranged overdraft, that is all well and good. Here is what Nationwide says about unarranged overdrafts:

"We don’t offer unarranged overdrafts at Nationwide. Instead, we’ll try to stop any payments from coming out of your account if you don’t have enough money."
https://www.nationwide.co.uk/current-accounts/overdrafts/

That looks good to me. Are you saying that Nationwide is wrong, and that it does in fact offer unarranged overdrafts? Or are you saying that Nationwide does indeed not offer unarranged overdrafts, but that it should? Or do you agree with me, that the Nationwide approach of not offering unarranged overdrafts is good?

Nasqueron

GeoffTF said:

jimjames said:

GeoffTF said:

jimjames said:

GeoffTF said:

MattMattMattUK said:

eskbanker said:

MattMattMattUK said:

How would the banks feel about the regulator removing the silly overdraft rules they introduced last year

Which ones?  I thought the last significant regulatory change was the one four years ago, or are you thinking of something falling within the consumer duty provisions?

I must be getting old, I thought it was only last year. The stupid rules that said banks could only charge a single interest rate, no fees or charges etc.

I thought those rules were sensible. Banning unauthorised overdrafts would be good too.

I don't think that's a good idea at all. With the current rules I can keep all my money in a savings account and only need to pay it into my current account when a bill hits and it goes overdrawn. If they were banned I would have to keep money in it. There is no cost to me as the bank informs me if I go overdrawn and can clear it by 2.30pm

 The Nationwide Flex account, for example, does not allow unauthorised overdrafts. Banning unauthorised overdrafts, would give the customer more certainty.

Nationwide operate the same system I mentioned above, you get a message that your account doesn't have sufficient funds and can pay in enough to cover by 2.30pm to stop going overdrawn.

If you have an arranged overdraft, that is all well and good. Here is what Nationwide says about unarranged overdrafts:

"We don’t offer unarranged overdrafts at Nationwide. Instead, we’ll try to stop any payments from coming out of your account if you don’t have enough money."
https://www.nationwide.co.uk/current-accounts/overdrafts/

That looks good to me. Are you saying that Nationwide is wrong, and that it does in fact offer unarranged overdrafts? Or are you saying that Nationwide does indeed not offer unarranged overdrafts, but that it should? Or do you agree with me, that the Nationwide approach of not offering unarranged overdrafts is good?

It sounds more like they do what other banks do whereby if you were in briefly, e.g. rather than bounce a DD they pay and alert you, and you pay it off, they don't treat it as an overdraft and you don't get charged. NatWest do that too.

See: https://www.nationwide.co.uk/current-accounts/help/text-alerts/

The text alerts you automatically receive

If your mobile number is registered with us, you’ll automatically receive an alert if:

you've entered an unarranged overdraft and need to credit your account