Eight million users will pay more for going into the red after FCA’s borrowing shakeup. Some customers – potentially running into the millions – will now pay more for going into the red as a result of the move, which comes after the Financial Conduct Authority ordered a ban on excessive overdraft fees . HSBC’s new single rate for all overdrafts matches the 39.9% rate announced by Nationwide in July . However, there was disagreement about how many HSBC customers will pay more than they currently do.
The new rate is double the 19.9% that the bank now charges holders of several of its main accounts for an authorised overdraft. Other banks are expected to announce higher headline rates over the coming weeks. The watchdog had called the overdraft market “dysfunctional” and said it was causing significant consumer harm. There are 26 million UK overdraft users, and they are a huge cash cow for banks, which made more than £2.4bn from them in one year alone .
While the new rules do not take effect until April 2020 at the latest, banks have to give their customers notice of changes. In addition to the new rate, HSBC’s shakeup – which comes into effect on 14 March – includes the removal of a £5 daily fee for going overdrawn without permission, a reduction in the maximum monthly charge from £80 to £20, and the introduction of an interest-free £25 buffer on many accounts in order to provide some leeway should a customer accidentally nudge into the red. The ban would lead to a big reduction in costs for some people who may be struggling financially. A customer overdrawn by £200 for 15 days without permissionwould have the amount they are charged slashed from £80 now to £2.78 under the new structure.
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