Bank overdraft cap could be re-examined, says FCA

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A decision by the competition regulator not to recommend a cap on excessive overdraft charges could be re-examined, the Financial Conduct Authority says.

In its report on bank accounts published in August, the Competition and Markets Authority (CMA) decided against a cap on charges.

However the FCA has now announced that it is to examine the issue in detail itself.

It said its inquiry could look at a compulsory limit on overdraft charges.

Christopher Woolard, executive director of strategy and competition at the FCA, said it would take action to improve competition in the current account market.

And he said the question of overdraft charges would be a priority.

“Our role in regulating retail banking markets goes beyond the remedies the CMA has asked us to take forward, and we will continue to look more broadly at how well these markets work, with a particular focus planned on high-cost credit including overdrafts.”

The CMA recommended that banks be allowed to set their own Maximum Monthly Charges (MMCs), but decided against an industry-wide cap.

‘Good news’

However consumer groups have consistently argued there should be a limit on overdraft charges.

“Regulators have acknowledged the need for caps in other markets, including credit cards and payday loans, and there is a clear need for the FCA to set a monthly maximum charge cap for overdrafts,” said Mike O’Connor, chief executive of the debt charity StepChange.

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As part of its remit, the FCA can take consumer issues into account, while the CMA only looks at whether competition is working effectively.

Which? said the announcement could be good news for bank customers.

“We welcome this commitment to review punitive unarranged overdraft fees, which our research has found can be more expensive than some payday loans,” said Vickie Sheriff, Which? director of campaigns and communications.

The CMA’s report on banking was criticised earlier this week by MPs on the Treasury Committee.

Labour’s Rachel Reeves accused the CMA of a “dereliction of duty”.


The FCA will now examine the CMA’s recommendations, as well as conducting its own inquiry.

Apart from looking at the issue of overdraft charges, it will investigate:

  • Door-to-door lending
  • Logbook loans
  • Guarantor lending ( where a third party guarantees to re-pay the loan)

The final result is not expected until 2018, although the FCA’s thinking should become clear before then.

Bank overdraft cap could be re-examined, says FCA

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