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

GeoffTF

Nasqueron said:

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

Perhaps it is a matter of terminology. Nationwide says you have not entered an overdraft if they have not yet made the payment, but NatWest says you have. Clearly, offering you the opportunity add funds to the account rather than bouncing a DD is helpful. Nonetheless, many people would want a debit card payment without sufficient funds to be blocked. If needs be, they can credit more funds, or use another card. Many people would also want a money transfer to be blocked if there are insufficient funds.

I recently cut the overdraft facility on my main account to £300. I have never overdrawn by more than a few pounds, and a much bigger overdraft facility seemed to be an unnecessary security risk. Nonetheless, there is no guarantee that my bank would not let let a hacker run up a huge unarranged overdraft on my account.

Nasqueron

GeoffTF said:

Nasqueron said:

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

Perhaps it is a matter of terminology. Nationwide says you have not entered an overdraft if they have not yet made the payment, but NatWest says you have. Clearly, offering you the opportunity add funds to the account rather than bouncing a DD is helpful. Nonetheless, many people would want a debit card payment without sufficient funds to be blocked. If needs be, they can credit more funds, or use another card. Many people would also want a money transfer to be blocked if there are insufficient funds.

I recently cut the overdraft facility on my main account to £300. I have never overdrawn by more than a few pounds, and a much bigger overdraft facility seemed to be an unnecessary security risk. Nonetheless, there is no guarantee that my bank would not let let a hacker run up a huge unarranged overdraft on my account.

I am not disagreeing with you on this at all mate!

Just saying that some banks have a flexibility on OD where a DD for example doesn't fail (so you don't get missed payments or contract cancellations) and you don't get a fee for going into -ve briefly when DD are pulled at 2am or whatever and correct it when you wake up

miller

Another vote for no unarranged overdrafts and certainly not unarranged overdrafts still charged at 39.9% like some banks. The flexibility some have mentioned in this thread about briefly going into the red can be achieved with an arranged overdraft, anything else is just leaving it to chance that the bank will pay anyway.

eskbanker

miller said:

Another vote for no unarranged overdrafts and certainly not unarranged overdrafts still charged at 39.9% like some banks. The flexibility some have mentioned in this thread about briefly going into the red can be achieved with an arranged overdraft, anything else is just leaving it to chance that the bank will pay anyway.

Just to be clear, the regulatory changes introduced four years ago mandated that charges must be the same between arranged and unarranged overdrafts, so unsurprisingly they gravitated towards the higher figure, despite the FCA's ludicrous assertion at the time that "We have eliminated high prices for unarranged overdrafts"!

https://www.fca.org.uk/news/press-releases/new-overdraft-rules-mean

miller

eskbanker said:

miller said:

Another vote for no unarranged overdrafts and certainly not unarranged overdrafts still charged at 39.9% like some banks. The flexibility some have mentioned in this thread about briefly going into the red can be achieved with an arranged overdraft, anything else is just leaving it to chance that the bank will pay anyway.

Just to be clear, the regulatory changes introduced four years ago mandated that charges must be the same between arranged and unarranged overdrafts

Interest rates diverge, for example Nationwide generally charge 39.9% on arranged overdrafts, and 0% on unarranged overdrafts: https://www.nationwide.co.uk/current-accounts/overdrafts/

TSB charge 39.9% for both arranged and unarranged: https://www.tsb.co.uk/current-accounts/overdrafts.html

I'd rather not be given any unarranged overdraft at all. Lloyds used to charge £10 for "Control" to  be added on their current accounts which would aim to prevent unarranged overdrafts, but dropped that feature when they moved to the unarranged overdrafts being charged at 0%.

eskbanker

miller said:

eskbanker said:

miller said:

Another vote for no unarranged overdrafts and certainly not unarranged overdrafts still charged at 39.9% like some banks. The flexibility some have mentioned in this thread about briefly going into the red can be achieved with an arranged overdraft, anything else is just leaving it to chance that the bank will pay anyway.

Just to be clear, the regulatory changes introduced four years ago mandated that charges must be the same between arranged and unarranged overdrafts

Interest rates diverge, for example Nationwide generally charge 39.9% on arranged overdrafts, and 0% on unarranged overdrafts: https://www.nationwide.co.uk/current-accounts/overdrafts/

TSB charge 39.9% for both arranged and unarranged: https://www.tsb.co.uk/current-accounts/overdrafts.html

I'd rather not be given any unarranged overdraft at all. Lloyds used to charge £10 for "Control" to  be added on their current accounts which would aim to prevent unarranged overdrafts, but dropped that feature when they moved to the unarranged overdrafts being charged at 0%.

They're not really "0% unarranged overdrafts" as such, in that it's made clear that unarranged overdrafts aren't supported, that they'll do what they can to prevent use, and won't allow accounts to continue in that state, so it's not a 0% overdraft in any meaningful sense.