These are the final rules we are introducing to reform the overdraft market.
In our Consultation Paper, CP18/42 (December 2018), we explained why fundamental reform was needed to the way banks charge for overdrafts. We proposed radical changes to the overdraft market to address harm from high prices for unarranged overdrafts, complex pricing structures, low consumer awareness and the repeat use of overdrafts.
Our package of remedies to make overdraft pricing simpler, fairer and easier to manage has been widely supported. We are:
We expect that the changes will result in a fairer distribution of charges, particularly benefitting vulnerable consumers, who are disproportionately hit by high unarranged overdraft charges.
This paper summarises the feedback we received, and our response to it. We are going ahead with our proposals, with some minor changes. We are extending the implementation period for some elements of the package, to ensure that firms have enough time to implement significant changes properly.
We are consulting separately in CP19/18 on further proposals to require firms to publish overdraft fees and charges for overdrafts as part of the current account service metrics.
We looked at overdrafts as part of our High-Cost Credit Review.
Our analysis showed that fundamental reform of overdrafts was required. The changes we are making today will reform the market, and lead to significantly improved outcomes for millions of overdraft users.
Please read the parts of the paper that are relevant to you.
If you would like to respond to Consultation Paper 19/18, which we are publishing alongside this Policy Statement, you can do so by 7 August 2019.
The new rules will come in to force on 6 April 2020, apart from the refused payment fees guidance, which will take effect immediately and the repeat use rules, which will come into force on 18 December 2019.
The implementation date for the rules we published in CP18/42 is 18 December 2019.
We will monitor the market and keep overdraft pricing under review once the rules have been implemented.