Competition watchdog calls for a cap on overdraft fees
The Competition and Markets Authority says UK banks should work harder for their customers
This month, the Competition and Markets Authority (CMA) published its much anticipated report into the charges banks place on you if you exceed your current account’s authorised overdraft limit.
If imposed, the report will mean big changes in the way your bank tells you about your overdraft options and what charges you could be liable for.
One of the biggest problems identified by the report was the fees that banks charge if you go over your agreed overdraft limit. Monthly fees vary, from £35 at Barclays to £100 at Halifax. The CMA agrees with most of us that these fees are too high. The report also suggests that it is too difficult to compare one bank’s position on charges to another, making comparing alternatives impossible.
To tackle these issues, the report recommends an overall cap on the amount which a bank can charge for overdraft fees and a standardised format for presenting fees so it becomes clear if another bank is offering a cheaper deal.
These could be important steps for anyone who finds that they are coming up short at the end of the month. Standardising the way fees are presented will make it easier to see what our bank is charging us for overdraft services and, with the seven day switching service, it is now easier than ever to switch to a better deal.
In theory a real shake-up could be on the cards. Gillian Guy, chief executive of Citizens Advice, welcomed the report saying that high charges “can quickly push people into cycles of dangerous debt”.
However some commentators were left disappointed. Commenting in the Financial Times, Alex Neill, director of policy and campaigns at consumer group Which?, said the inquiry “has achieved little more than to propose basic information and measures the big banks should have introduced years ago.”
Only time will tell. Until changes are made, the best thing you can do is to make sure your current account has an authorised overdraft facility with reasonable rates. It might take a little shopping around to find the best deal but it will be worth it to avoid the fees attached to unauthorised overdrafts.