Pressure mounts on FCA to introduce overdraft cap
The Financial Conduct Authority (FCA) has come under renewed pressure to clamp down on excessive overdraft fees today after new research revealed thousands of people are being hit with triple-digit bills.
Debt charity Step Change said between six and 10 thousand people a month contact them looking for help managing their finances after incurring overdraft fees. The charity found 39 per cent had been stung by charges totaling £225 a year, and blamed the excessive fees for tipping people further into a spiral of debt.
The findings come amid mounting concerns over the fees banks charge to their customers for unarranged borrowing. Conservative MP Andrew Tyrie recently published correspondence with all of the major high street lenders, detailing their complicated structure of overdraft charges and fees, and attacking them for a lack of transparency.
The Competition and Markets Authority (CMA) fell short of recommending an outright cap on overdraft fees in its recent investigation into retail banking, although campaigners are stepping up their efforts.
Read more: Banks reveal their overdraft charges
Mike O'Connor, chief executive of Step Change said: "Financially vulnerable people need help rather than being pushed further into trouble each month. It is time for the FCA to intervene, as they did with payday loans, to set a cap on the amount banks can charge for unarranged overdrafts."
Labour MP Rachel Reeves, who sits on the Treasury Select Committee with Andrew Tyrie and has been campaigning on fees with her Conservative colleague, said: "The banks should help [people] to manage their finances to get out of the cycle of debt, rather than pushing these people deeper into crisis with extortionate charges."
Matthew Carter, director of products at the Co-operative Bank, which levels a £10 per day flat fee for unauthorised overdrafts, capped at £60 per quarter, said "complex charging structures make it difficult to calculate exactly what costs will apply" when they fall into the red.
Challenger bank Virgin Money also lent its support to to a "regulatory cap on the monthly maximum charge" for overdrafts.
The British Bankers' Association said: "Across the board overdraft charges have plummeted with customers saving nearly £1 billion a year, and a number of products now offer a fee and interest free facility within an approved overdraft limit."