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The Financial Conduct Authority (FCA) has ordered banks not to charge customers more for unarranged overdrafts than for arranged ones from 1st April 2020 onward.
Andrew Bailey, chief executive of the FCA, said unarranged overdraft costs are “often 10 times as high as fees for payday loans”.
An arranged overdraft is set up by agreement in advance, whereas an unarranged one is taken out automatically when an account balance dips into the red.
Consequently, from April 2020, banks can only charge overdraft users a simple annual interest rate – without additional fees and charges.
