Financial Conduct Authority takes aim at bank overdrafts in high-cost credit review

The Financial Conduct Authority (FCA) might launch an extreme overhaul of the method banks operate overdrafts.In its report on

high-cost credit, released today, the FCA stated the manner in which banks operate and charge for overdrafts needs "fundamental reform".

It stated that banks made an approximated ₤ 2.3 bn in revenue from overdrafts in 2016 with 30 percent of this from unarranged overdrafts.Read more: FCA knocks robo-advisers for deceiving consumers and inadequate checks Most of unarranged overdraft charges are paid by 1.5 percent of clients who pay around ₤ 450 a year in fees and charges, the FCA said.The FCA has actually put forward a bundle of immediate reforms to overdrafts as well as prepares to take a look at the issue more widely in its upcoming evaluation of the retail banking market.Proposed reforms consist of mobile alerts caution of prospective overdraft charges, stopping the inclusion of overdrafts in the

term'offered funds', needing online tools to make expenses of overdrafts clearer, introducing online tools to asses eligibility for overdrafts and making it clearer that overdrafts are credit or borrowing.Read more: FCA states 150,000'home loan detainees 'need assistance switching to much better deals It has also taken a look at the rent-to-own sector where it is proposing a cap on prices.It said it had actually seen examples where people had paid over ₤ 1,500 for fundamental basics like electrical cookers which could be bought on the high street for less than ₤ 300. The FCA is also taking a look at propositions for reform in the home-collected

credit sector and in relation to catalogue and store cards.FCA chief executive Andrew Bailey said:"Our instant proposed changes will make overdraft expenses more transparent and avoid people accidentally

dipping in to an overdraft in the first location. Nevertheless, we think more basic modification is required in the method banks charge consumers for overdrafts. Offered the size of the marketplace our work here will be finished as part of our wider review into retail banking."