Our response to FCA overdraft rules

_{7 June 2019}

Today the Financial Conduct Authority has followed through on its commitment to introduce wide-ranging reform of overdrafts.

Around half of our clients have accumulated overdraft debt, of an average of over £1,500, at the point they seek debt advice. On average, clients with overdraft debt we surveyed in 2016 had been in their arranged overdraft 11 out of the last 12 months. Almost two thirds of our clients (62%) with overdraft debt had regularly had to exceed their arranged overdraft limit, doing so in an average of five out of the last 12 months.

Peter Tutton, our Head of Policy, says:

"The FCA is absolutely right to point to the harm that getting stuck in expensive repeated overdrafts can cause. Our own research shows that around half our clients have accumulated overdraft debt at the point they turn to us. So while it’s disappointing that the rules prohibiting harmful unauthorised overdraft charges will take a bit longer, we are delighted that the FCA is turning the page on a long standing cause of hardship for struggling households.

"The challenge now is to make sure the steps to help customers get out of expensive overdraft debt work in practice.

"In the credit card market, the effectiveness of the remedies required by the FCA is not yet proven in practice. In the overdrafts market we would therefore like the regulator to be more pro-active and fleet of foot in identifying and refining the specific, practical steps banks should be taking to help customers escape the overdraft trap more quickly, and to break the cycle of repeat use of overdrafts".

Notes to Editors

1. The FCA has today published a policy statement (PS 19/16) setting out the new rules and requirements on overdrafts. This follows earlier consultation on the proposed changes.