The Financial Conduct Authority wants to know how and why banks are planning on charging 40% on overdrafts.
Some banks, including Lloyds, are already at that figure, prompting questions from the FCA over whether consumer interests are being considered at all, or whether profit is the only thing on the agenda.
Overdrafts are supposed to be there as a safety net, a temporary buffer zone.
They are not supposed to be a cause of prolonged and worsening debt...
The FCA is concerned that vulnerable members of the public could end up in serious difficulty due to the interest hikes, and have asked banks to provide evidence and justification for how they decided upon the new figure.
Efforts should be made, according to the FCA, to ensure that customers are able to settle their overdrafts in a way that suits the customer.
With changes coming in on the 6th April, which will see all banks required to charge the same amount of interest on overdrafts, this is a matter of urgency.
Have Lloyds jumped the gun? Or are they simply playing their hand before everyone else plays similarly high cards?
Time will tell, but for now, the FCA wants to see those most affected, supported with arrangements such as reduced or waived interest fees, continued rates of interest, or advice regarding moving over to a more cost-effective method of borrowing, such as longer-term loans.
Will the banks respond or will they continue to test the water with interest fees that sooner rather than later, they’ll all have to match?
Look out for updates from your bank in the coming months, and keep a close eye on your overdraft.
It’s in your best interests.
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