StepChange Debt Charity reaction to FCA response to the CMA retail banking market investigation
3 November, 2016
Reacting to today’s Financial Conduct Authority (FCA) response to the Competition and Markets Authority (CMA) retail banking market review, Mike O’Connor, Chief Executive of StepChange Debt Charity said:
“I welcome the FCA’s acknowledgment that the CMA remedies do not go far enough in addressing the systemic problems in the overdraft market. Dealing with the harm caused to consumers who are trapped in persistent overdraft debt is now an acid test of the FCA’s commitment to its consumer protection obligations. We are seeing consumer detriment now, so lengthy delays in implementing suitable reforms risks further harm to people in financial difficulty.
“The FCA acknowledges overdrafts as a form of high-cost short-term credit and we are pleased that the issue will be included in the forthcoming review of the payday loan cap. Any review of the monthly maximum charge (MMC) cap is not due to take place until late 2018 and it is unclear what, if any, action will be taken in the shorter-term to fix an overdraft market that is failing those in debt. 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.
StepChange Debt Charity overdraft statistics 2016
- In the first six months of this year, the charity advised 93,000 people with overdraft debts, with the average amount owed being £1,679.
- In a survey of 1,019 clients with overdrafts the charity found that they used their overdraft in 11 out of 12 months.
- Nearly two thirds (62%) of survey respondents had gone over their limit in the last year and did so in an average of five of the past 12 months.
- 39% of respondents revealed that they faced average charges of £45 each time for using an unarranged overdraft, adding around £225 a year to their debts.
Notes to editors
- StepChange Debt Charity provides free and independent debt advice by telephone and through its online Debt Remedy tool.