The UK financial regulator has introduced a series of reforms set to change the face of overdraft fees.
Under the new rules set to apply by April next year, banks won’t be allowed to charge fixed daily or monthly fees for overdrafts.
The Financial Conduct Authority (FCA), which first announced the new measures in December, said it will also ban charging more for unarranged overdrafts than for arranged ones – but those charges will also be uncapped.
Banks and building societies will instead have to apply an annual interest rate on all overdrafts – which must be clearly displayed on all advertisements, to make it easier for consumers to pick the right deal for them.
The FCA said that the changes will make overdrafts “simple, fairer, and easier to manage” and should protect more vulnerable consumers in particular.
An unarranged overdraft of £100 typically costs around £5 a day, but will be reduced to less than 20p a day when the new rules are brought in.