This paper sets out our proposals to radically reform the ways banks and building societies charge for overdrafts. It also sets out the rules we have made to address low awareness and engagement in this market.
We see harm to consumers – particularly to vulnerable consumers – from the disproportionate burden of high charges and repeat use of overdrafts. Our package of proposed changes is intended to reduce this harm.
We want to address the complexity of overdrafts, the high level of charges and the harm from repeat use with a package of remedies that includes:
Please read the parts of the paper that matter to you.
We suggest that you read the whole of this document if you are a:
If you are a provider offering products marketed to consumers as having the same function as an overdraft – for example rolling account credit products marketed alongside pre-paid cards – you should read Chapter 4, but you may want to read the full document.
Payment service providers offering payment accounts that charge for refused payments should read the relevant sections of chapter 4.
As part of our Review, we have also separately published consultation papers on changes for the rent-to-own market including proposals for a price-cap and our Feedback on CP18/12 with final rules and guidance and consultation on Buy Now Pay Later offers.
Please send us your comments by 18 March 2019.
You can also:
We will consider your responses and publish our final rules in June 2019.
After this, firms will have 6 months to comply with the rules on pricing and repeat use, meaning they would be in force by early December 2019.
Once the rules are made, we will monitor the market and keep overdraft pricing under review.
The rules to address low levels of awareness and engagement with overdrafts described in Chapter 7 come into force on 18 December 2019. However, we are consulting in Chapter 8 on proposals to bring this date forward to early December 2019. This is so that implementation of those rules is aligned with the proposed implementation of the pricing and repeat use rules.