The APPG calls on The FCA to suspend the imminent change to overdraft rules, which will see some interest rates on overdrafts increase tenfold. Due to new FCA rules, from April 2020, banks can only charge for overdraft users a simple annual interest rate – without additional fees and charges so that all users of unarranged overdrafts will be better off or see no change. In many scenarios, however, rates for users of arranged overdrafts will increase significantly, with some rising from as low as 3% to the new industry standard of 39.9%.
We commend RBS for delaying the interest rate hike for overdraft charges, and we call on the entire industry to follow suit. In these uncertain times, many businesses and families will use their overdraft facilities to try to get through this crisis and banks should not profit from the financial hardship that ensues. Banks have a moral obligation to ensure that the funds that many are receiving directly from the government and the Bank of England do not result in punitive interest rates, but flow into households’ funds to ensure they are able to weather the current crisis.
In the long term, we believe that the FCA needs to rethink its current policy which has exposed many responsible borrowers to punitive interest rates.