Overdrafts to Show Money as Debt Not ‘Available Funds’
December 20, 2019
New rules have been introduced by regulators that mean banking customers will no longer see their overdrafts displayed as ‘available funds’ when they check in on their finances.
The rule changes are designed in part to emphasise to consumers the fact that when they spend money via overdrafts they aren’t using their own funds but rather they’re using credit and entering debt.
It’s hoped that by no longer seeing their overdraft money presented to them as being cash that’s available people might be more reticent about using their overdrafts so often.
A variety of other rule changes relating to overdrafts are set to be introduced by the Financial Conduct Authority (FCA) from April 2020, with the aim being to better protect indebted consumers around the country.
One of the incoming changes will ensure that banks and building societies can no longer charge their customers more money for using unauthorised overdrafts than they do for using authorised overdrafts.
Banks and building societies will also be obliged to highlight the costs of using their overdraft services in ways that should make it easier for customers to compare those deals with rival offerings from other providers.
More generally the FCA wants to see banks and building societies become much clearer about precisely what costs their customers will incur when using their overdraft facilities in order to make the market more competitive.
The debt help charity StepChange has said that around 46 per cent of people it advised in the first half of 2019 had overdraft debts to worry about as part of their broader financial concerns.
The organisation has backed the FCA’s plans to encourage greater transparency and lower fees in the realms of overdrafts and emphasised that the issue is a very serious one for a great many people struggling with debts across the country.
“Overdraft debt is very common and can be very expensive – often more than the cost of a payday loan,” explained StepChange’s head of policy Peter Trutton.
“Helping people to reduce repeated, expensive overdraft use is a significant step in reducing the vicious cycle under which the more financially vulnerable you are, the more expensive it is for you to use financial services, potentially pushing you even further into financial difficulty.”