UK regulator investigating high bank overdraft fees

Overdraft fees of as high as 40%, which is several times that of payday loans, are being investigated by the United Kingdoms main watchdog agency, the Financial Conduct Authority (FCA). The high fees are mostly paid by families on a low income or benefits, who live paycheque to paycheque. The FCA is investigating the new high priced bank overdraft fees from high street banks for collusion, and the watchdog is demanding help be given to the vulnerable.

Not only are bank fees of high as 39.9 or 40% hitting vulnerable customers the most, many of the banks and lenders (including HSBC, Barclays, RBS and Santander UK) recently doubled those fees to the new 40%. There is no good reason why that was done. In fact, these high street banks are sometimes as high as 10 times the fees as well as costs of payday lenders.

In addition to the costs going up, the other interesting point is that almost all banks across the country have increased the overdraft fees to either 39.9 or 40%. This means there is no competition for customers. In addition, it smells like some sort of collusion from high street lenders – why did they all select the same high interest rates at the same time? Now the Financial Conduct Authority is investigating.

Assistance for customers facing high overdraft fees

The fact is that in the past banks were abusing the overdraft market. In order to help with that crisis, the FCA put new regulations into place for 2020. Those new rules from the UK watchdog did save consumers money on the outgoing cost of fees (not APR rates), and some experts indicate the savings were £660 per year, or £55 per month. That rule was put into place by the FCA. Now, sadly but maybe not surprisingly, the main banks have increased the interest rates to as much as 40% since the exact fixed amount of fees were reduced. This is unacceptable to the government as well as the UKs Financial Conduct Authority.

The FCA wants banks, including Bank of Scotland and Santander, to provide assistance to vulnerable customers; not increase their APR interest rates for overdraft fees. For those fees that are now set at 40%, the Financial Conduct Authority is demanding relief for the low income, poor, and struggling bank customers.

As examples of what the FCA is asking for, they are stating lenders can waive some fees or costs. Or reduce interest rates on any loans, or not charge the vulnerable up to 40%. Or maybe loan repayment schemes can be put into place by banks including Royal Bank of Scotland or HSBC. The point is that the watchdog is saying that if a bank is increasing fees to 40$, then some other financial help needs to be offered too.

Anyone facing high bank overdraft fees or other costs from the lender can get help. There are charities including StepChange, churches, Citizens Advice, and other options. Read more on debt help from charities.

As times goes on, and the FCA continues to tackle overdraft fees, payday lenders, and other financial abuse from corporations, always seek help. As while the Financial Conduct Authority does their best to stop financial abuse, there are always new schemes from banks and lenders that are aimed at hurting the vulnerable.