FCA should go further and impose cap on overdraft fees, says NEF

By agency reporter
December 20, 2018

Reacting to news of the Financial Conduct Authority’s plans to reshape the way in which the overdraft market works for consumers, Andrew Pendleton, Director of Policy and Advocacy at the New Economics Foundation, and member of the End the Debt Trap Coalition, said: “Eight million households are now caught in a consumer debt trap and paying out more than one quarter of their income in interest and charges. This is a crisis for those people and a big risk for the economy. Unsustainable private debt caused the last financial crisis.

“Banks are currently making more than £2.4 billion from charges on overdrafts and around 30 per cent of this is from unarranged overdrafts, which indebted households often rely on to make ends meet or to repay other loans.

“The FCA are right to take action on overdrafts, but their proposed solution risks leaving the fate of households in the hands of banks. Under the FCA proposals, banks would not be allowed to charge more for unarranged overdrafts than for those that are pre-arranged. But that doesn’t stop them putting up all of their charges. And as people tend not to switch bank accounts, competition is unlikely to prevent this.

“Instead the FCA should extend the cap applied to payday lenders  – and about to be applied to the Rent to Own sector  – to overdrafts so that banks can’t just hike their charges and continue to make outrageous profits from people’s misfortune.”

* New Economics Foundation https://neweconomics.org/

[Ekk/6]

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