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FCA overhauls bank overdraft charges.

Banks are to be banned from imposing higher fees for unarranged overdrafts with the Financial Conduct Authority (FCA), Britain’s financial watchdog, proposing to make the biggest intervention in the overdraft market for a generation.

Banks are to be banned from imposing higher fees for unarranged overdrafts with the Financial Conduct Authority (FCA), Britain’s financial watchdog, proposing to make the biggest intervention in the overdraft market for a generation.

Banks earned £2.4billion from overdraft charges in 2017 with around 30% coming from unarranged overdrafts while more than half of banks’ unarranged overdraft fees came from just 1.5% of customers in 2016 with people living in deprived areas most affected, the FCA said. The watchdog is proposing that the price for each overdraft, whether arranged or not, is brought in line with each other by way of a simple, single interest rate with no fixed daily or monthly charges.

“Banks will no longer be able to charge rip-off unarranged overdraft fees which have long penalised their customers, many of whom can afford it least” said Jenni Allen, managing director of consumer group Which?

John Collins, managing director at Bira Bank, the only Trade Association owned bank in the UK, welcomed the move saying “The 2008 banking crisis did not bring an end to these same banks insisting that they were transparent and trustworthy yet it has again taken regulatory intervention to safeguard the interests of the financially vulnerable in society. From baling out systemically important banks to PPI and now this, consumers continue to suffer from banking malpractice”.

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