FCA announces proposals to fundamentally reform the way banks charge for overdrafts and extends protections for other high-cost credit products

[Legal Beagles]

The Financial Conduct Authority (FCA) has today announced the next package of measures forming part of its high-cost credit review. It has announced proposals to change how banks charge for overdrafts, which would bring to an end to banks charging higher prices for unarranged overdrafts. Alongside this the FCA has published the results of its review into the retail banking market.

https://www.fca.org.uk/news/press-re...ds-protections

[EXC]

So looks like unauthorised overdrafts should be charged at the same rate as authorised, so they'll just raise authorised fees lol and refused payment fees should be cost reflective.

[Amethyst]

Pretty sure this is what we were arguing back in 2006 ( 12 !!!! years ago ) ( didn't we have a document that showed the cost was under 50p though I don't think the calculation included quite so much 'attributable' cost ).



----------------------------------------------------------

•

banning fixed fees for borrowing through an overdraft (other than fees for refusing a payment due to lack of funds (‘refused payment fees’), which firms are entitled to charge for under the Payment Services Regulations 2017

• issuing new guidance to reiterate that refused payment fees should reasonably correspond to the costs of refusing payments, and explain the costs that may be included,

• issuing new guidance to help firms comply with existing rules – refused payment fees should reasonably correspond to the costs of refusing payments

We see potential for harm from refused payment fees if they are too high, especially as they are highly concentrated on vulnerable consumers. We would need to see further evidence to enable us to conclude that refused payment fees reasonably correspond to firms’ actual costs.


4.65 Relevant costs include:
• incremental payment system cost incurred in the process of refusing a payment
• providing alerts and notifications: including text messages, emails and letters in respect of a refused payment
• customer service contact initiated by the customer over the phone, through digital channels and in branches as a result of a refused payment
• the cost of handling a complaint arising out of a refused payment
• certain infrastructure costs, as long as these can be reasonably allocated to the activity of refusing payments according to an appropriate accounting methodology

4.66 Refused payment fees should reasonably correspond to the actual cost of refusing payments in each product line.

Appendix 3

• not set their refused payment fees so as to derive a profit

8.250B The costs reasonably referable to the refusal of payments will include:
• costs that are directly attributable to the refusal of a particular payment and would be avoided if the payment was not refused
• costs that arise from the refusal of payments in general, including costs that would be wholly avoided if the PSP refused no payments