In May last year I joined with consumer group Which? calling for banks to end rip off unarranged overdraft fees. I’m delighted that the Financial Conduct Authority (FCA) has now agreed that banks will no longer be able to charge higher prices for people who go over their arranged overdraft limit.
It has been announced today that the FCA will take action to ensure that charges are fair and proportionate. The evidence doesn’t justify the much higher charges that firms have been imposing for unarranged overdrafts.
Which? expect the typical cost of borrowing £100 through an unarranged overdraft to drop from £5 a day to less than 20p a day following our reforms, and all overdraft charges to be well below the level of the daily price cap on payday loans.
These fees most often hit those who can least afford them and contribute to people entering a vicious spiral of debt, often turning to loan sharks and ending up losing their homes.
Since being elected, I have regularly called out some banks in Parliament for unfair practices. I hope this is the start of the better banking system that we need in this country.
At the last General Election we in the Labour Party backed stronger consumer rights for banking customers. We need to rebalance our banking system so it works for individual customers and small businesses. It’s good to see the FCA have acted on one of our calls.