October 2, 2019 11:01:37 AM
Overdraft providers will be required to publish details of their pricing for going into the red every quarter as part of moves to make charges simpler to understand.
The Financial Conduct Authority (FCA) set out the new rules around overdrafts to help make bank and building society overdraft charges clearer and fairer.
Firms already publish some information about current accounts on the FCA’s website, including how long it takes to open a current account for new customers.
From next summer, they will also need to publish a range of overdraft pricing details on a quarterly basis.
The information will show the interest rates and refused payment fees consumers are being charged for an overdraft.
The FCA’s policy statement said: “This will help consumers choose a current account that gives them what they value, and will help third parties to compare products across different current account brands.
“It will also mitigate the risk that the representative annual percentage rate (APR), which firms are required to publish in some advertising, may not reflect the APR individual customers receive.”
The FCA also said that an industry agreement led by UK Finance will also help consumers by standardising the way firms show the cost of using an overdraft.
The regulator has previously announced an overhaul of the way providers can charge for overdrafts from April 6 2020, as part of its wide-ranging high-cost credit review which also looked into other forms of borrowing.
Its plans to shake up the “dysfunctional” overdraft market include stopping banks and building societies from charging higher prices for unarranged overdrafts than for arranged overdrafts.
More than 50% of banks’ unarranged overdraft fees came from just 1.5% of customers in 2016.
Fixed fees for borrowing through an overdraft will also be banned.
Some commentators have suggested that the charging structure changes mean providers are likely to increase their APRs for arranged overdrafts.
In July, Nationwide Building Society announced that it would double its arranged overdraft rate for some customers by imposing a new single rate of 39.9% across its adult current account range while also removing unarranged borrowing charges.
Nationwide previously said it is confident that its changes, which take effect from November 11, will set a new benchmark for simplicity and transparency.