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11th June 2019
Banks are committed to helping customers manage overdrafts, says UK Finance
The Financial Conduct Authority (FCA) has announced it is introducing reforms to the overdraft market. The new rules, due to be implemented in April 2020, will prevent banks and building societies charging higher prices for unarranged overdrafts than for arranged overdrafts. Instead, firms will be required to price overdrafts by a simple annual interest rate. The regulator has also called on UK Finance to introduce a voluntary agreement to communicate the cost of overdraft borrowing to consumers in pounds and pence.
Eric Leenders, Managing Director, Personal Finance, 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 is due to 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 cash flow, 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.”