Your overdraft could be about to become cuddlier after the FCA outlined new rules
Your overdraft could be about to become a lot friendlier, after the Financial Conduct Authority (FCA) said it wants to improve competition in the market.
This morning the FCA said it wants to improve transparency in the overdraft market by introducing a maximum monthly charge, which it hopes will increase customers' engagement with their "overdraft use and charges".
It also said it wants more, er, innovative overdrafts, as well as requiring banks to publish "better" information on their overdrafts – and recommending that lenders test "prompts" to encourage consumers to think about their banking arrangements.
CMA recommendations
This comes in response to recommendations by the Competition and Markets Authority (CMA) back in August, which suggested (among other things) that overdraft customers should be given "grace periods", while opening and switching accounts should be made easier.
However, it was suggested the CMA's plans could cost lenders as much as £10bn.
What the FCA said
“It’s important that competition works well in the retail banking sector," said Christopher Woolard, executive director of strategy and competition at the FCA.
"Our work, taking action in response to the CMA's recommendations, will help to further drive effective competition by helping customers and small businesses to take more control of their finances.
“Our role in regulating retail banking markets goes beyond the remedies the CMA has asked us to take forward, and we will continue to look more broadly at how well these markets work, with a particular focus planned on high-cost credit including overdrafts. We will also be looking at wider retail banking business models."