BANKS may be forced to radically change the way they charge customers going into the red, Britain’s financial watchdog has warned.
The Financial Conduct Authority (FCA) today published the outcome of its review into high-cost credit, including unplanned overdrafts and payday loans.
It said that a fundamental reform of unarranged overdrafts was needed as it had “significant doubts” about whether they could continue in their current form.
“The nature and extent of the problems that we have found with unarranged overdrafts mean that maintaining the status quo is not an option,” said Andrew Bailey, chief executive of the FCA.
“We are now working to resolve these issues while preserving the parts of the market that consumers find useful.”
In the past, lawmakers have asked banks whether they use high overdraft fees to help subsidise free current accounts.
In 2012, Mr Bailey said that free banking was a “dangerous myth”.
It was previously reported that Mr Bailey could use the review into overdraft fees as a way to drive wider reform of how banks make profits – eventually putting an end to free banking.