Report: Banks need to set a monthly cap on unarranged charges

9th August 2016

A report by the Competition and Markets Authority (CMA) has suggested a number of measures to ensure banks work harder for customers and the benefits of new technology are fully exploited. The report main highlights includes:

  • Banks make £1.2 billion a year from unarranged overdraft charges. Banks will be required to send alerts to customers going into unarranged overdraft, and inform them of a grace period, to avoid charges – research by the FCA has shown that this type of alert, when combined with mobile banking, can heavily reduce overdraft charges. Banks will also have to set a monthly cap on unarranged charges, and tell their customers about it.
  • Requiring banks to implement Open Banking by early 2018, to accelerate technological change in the UK retail banking sector. Open Banking will enable personal customers and small businesses to share their data securely with other banks and with third parties, enabling them to manage their accounts with multiple providers through a single digital ‘app’, to take more control of their funds (for example to avoid overdraft charges and manage cashflow) and to compare products on the basis of their own requirements.
  • Underpinning these remedies, the CMA is introducing further measures to make it easier for customers to search and switch. At the moment only 3% of personal and 4% of business customers switch to a different bank in any year. This is despite, for example, personal customers in Great Britain being able to save £92 on average per year by switching provider, with savings of around £80 a year on average available for small businesses. Larger savings are available for overdraft users – for example, personal customers who are overdrawn for one or two weeks every month could save £180 per year on average.

A short overview of the CMA’s findings and proposals for retail banks can be found here.


Click here to find the full report.