UK Markets Watchdog Overhauls Bank Overdraft Charges

Banks will be banned from charging higher fees to 14 million people with unarranged overdrafts from the end of 2019, Britain's financial watchdog proposed on Tuesday, in what it called a radical move that could limit availability of free banking.The Financial Conduct Authority (FCA) said that banks earned more than 2.4 billion pounds ($3.03 billion) from overdraft charges in 2017, with around 30 percent of that from unarranged overdrafts - where customers become overdrawn without prior agreement or exceed any agreed overdraft limit.The price of using overdrafts, which are accessed by 26 million people or half the adult population of Britain each year, would be aligned, based on a simple, single interest rate, with no fixed daily or monthly charges, the FCA said."Today we are proposing to make the biggest intervention in the overdraft market for a generation," said FCA Chief Executive Andrew Bailey.British lawmakers, consumer groups and the Church of England have all called for changes in the so-called high-cost credit sector to stop vulnerable people getting further into debt as high fees and interest charges add up.It marks the latest intervention by a watchdog that has already capped interest rates on payday loans, and intends to cap prices of rent-to-own goods.More than half of banks' unarranged overdraft fees came from just 1.5 percent of customers in 2016, the FCA said. Unarranged overdraft fees can, in some cases, be more than ten times as high as fees for payday loans.Fees on an unarranged overdraft of 100 pounds would typically be slashed to 20 pence a day from 5 pounds at present, Christoper Woolard, the FCA's executive director for competition, told reporters.The FCA would watch for any attempts by banks to "sneak out" inappropriate charges elsewhere to make up for lost revenue, Woolard added.