Thursday 3 November 2016

Bank overdraft caps could be re-examined


A decision made by the competition regulator not to recommend a cap on excessive overdraft charges could be re-examined, the Financial Conduct Authority says.

In its report on bank accounts published in August, the Competition and Markets Authority (CMA) decided against a cap on charges.

However the FCA has now announced that it is to examine the issue in detail itself.

It said its inquiry could look at a compulsory limit on overdraft charges.

Christopher Woolard, executive director of strategy and competition at the FCA, said it would take action to improve competition in the current account market.

And he said the question of overdraft charges would be a priority.

"Our role in regulating retail banking markets goes beyond the remedies the CMA has asked us to take forward, and we will continue to look more broadly at how well these markets work, with a particular focus planned on high-cost credit including overdrafts."

The CMA recommended that banks be allowed to set their own Maximum Monthly Charges (MMCs), but decided against an industry-wide cap.

However consumer groups have consistently argued there should be a limit on overdraft charges.

"Regulators have acknowledged the need for caps in other markets, including credit cards and payday loans, and there is a clear need for the FCA to set a monthly maximum charge cap for overdrafts," said Mike O'Connor, chief executive of the debt charity StepChange.



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