£1bn overdraft victory for 15 million bank customers
19th April 2023 12:34
by Alice Guy from interactive investor
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This victory showcases technology, innovation, consumer duty and fair pricing, says Alice Guy.
Alice Guy, Head of Pensions and Savings at interactive investor says: “There is still more work to do to tackle the confusing and often hidden array of fees and charges across the financial sector. With consumer duty on the horizon, this victory shows the scale of what can be achieved when the regulatory and financial services sector harness technology and work together for the benefit of consumers.
“This is a victory for new technology, innovation, transparency and fair pricing for customers, with 15 million customers saving an average of £17 each during 2021 and poorer customers saving the most. Overdraft charges disproportionately affect the poorest in society and impact families using a much-needed release valve during the ongoing cost-of-living crisis.
“The new overdraft rules, introduced in 2020 and 2021, challenged lenders to use innovative technology to identify and support vulnerable customers who are repeatedly using their overdraft. They also required lenders to clearly advertise Annual Percentage Rates upfront and offer clear pricing with one single annual interest rate and no additional fees for customers using an unarranged overdraft.
“The scale of the savings is enormous and reveals the size of the original problem, with complex charging structures sometimes disguising APRs as high as 80% under the old regime, often hitting the same customers again and again as their debts spiralled. Some customers using unarranged overdrafts are now saving an amazing but shocking £68 per month under the rule changes due to the removal of punitive daily charges."
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