FCA must act to cap monthly charges on unauthorised bank overdrafts says Labour MP
Labour MP and Treasury committee member Rachel Reeves has called on the FCA to go beyond the recommendations of the Competion and Markets Authority and install a cap on banks' unauthorised overdraft charges.
The CMA last week proposed that banks should be forced to set their own cap on the amounts that they can charge customers on a monthly basis, with CMA retail banking investigation chair Alasdair Smith stating that he hoped to halve the amount of money that banks make from unauthorised overdraft fees.
However, in a letter to FCA interim chief executive Tracey McDermott, Reeves, Labour's former shadow work and pensions secretary, argued that the proposals “fall drastically short of what is needed”.
Noting that some banks already institute a maximum charge- Barclays charge £5 a day up to £35, while RBS charge £6 a day up to £90 – Reeves said it is difficult to see how the proposals will bring change.
“While it is right that consumers should be given information that enables them to compare and switch provider, the CMA acknowledges that heavy overdraft users are the least likely group to switch,” Reeves said.
“I therefore fail to see how its current proposed remedy will adequately address the harm that has been identified, either through lower charges or increased switching from this group.”
The CMA is required to publish its final report on the retail banking sector by 12 August.
An FCA spokeswoman declined to comment.