The Financial Conduct Authority suggests that it would be more vigilant with all kinds of overdrafts, arranged or unarranged. This move by the financial watchdog was welcomed and appreciated by consumer campaigners who agreed to the fact that many a time, overdrafts can prove to be more expensive than a payday loan.
The Competition and Markets Authority (CMA) echoed similar notes and put forth the issue of customer’s over dependency on overdrafts and how their inability to understand complex overdraft charging structures has become the biggest reason for huge financial losses and lots of stress.
The main aim of the FCA is to boost the account sector competition for which it needs an in-depth analysis of the current consumer scenario to gauge a complete picture of the credit and loan market. This research would include everything starting from door-to-door lending and logbook loans. It also wants to tighten situations where consumers exploit the facility of overdrafts in such a way that other financial institutions may not offer them loans.
As reformatory measures, a cap on payday loans was declared so that people can be saved from heavy debts. Financial experts have welcomed this step and are being supported by public advisory institutions such as the Citizens Advice. Representative of Citizens Advice said that “Overdraft charges can quickly add up to unmanageable debt. An unplanned expense that pushes someone into their overdraft by just a few pounds can lead to them being trapped in a cycle of daily charges.”
They further added that “We helped people with 52,000 overdraft debt problems in the last year – in some cases people are paying more in overdraft charges than they would for a payday loan.” This proves that overdrafts can be dangerous if not kept in control. Again, the FCA’s step towards reducing overdrafts is expected to bring some good results and would be highly beneficial for the UK people in general.
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