New overdraft rules take effect today for RBS, TSB, Santander and more
New overdraft rules come into effect today, which means companies can only charge one annual interest rate for arranged and non-arranged borrowing.
Many overdraft providers had set their new one-time overdraft rates at around 40% – which is about double the rate that some borrowers used to pay to use their arranged overdraft.
However, as part of interim measures to help cushion the financial impact of the coronavirus, some providers are temporarily freezing rates at lower levels or reducing them to what they were before they rose.
Many suppliers are also increasing their overdraft margins at zero interest., so borrowers may pay nothing in the short term.
From Thursday April 9 for a period of three months, HSBC UK will automatically increase its temporary interest-free buffer to £ 500 for millions of clients overdrawn on bank accounts and advance accounts.
NatWest froze overdraft interest at prevailing retail rates for at least three months.
Temporary relief offered to overdraft clients affected by the coronavirus epidemic varies by vendor.
But the FCA proposed last week that a general interest-free buffer of £ 500 be introduced between vendors, for up to three months, on people’s main accounts.
The proposal consulted ends on Monday April 6 and if accepted it could be in place by Thursday April 9.
In the meantime, the new industry rules coming into effect April 6 aim to make overdraft pricing simpler and fairer, reducing the burden on some people who previously paid high fees.
The new rules will especially help people who have paid high fees in the past for overdrafting that is not settled.
The FCA has previously found that overdraft fees are often 10 times higher than payday loan fees and fall disproportionately on vulnerable consumers.
The regulator’s calculations suggest the cost of borrowing £ 100 through an unplanned overdraft would drop from £ 5 a day to less than 10p a day.
Gareth Shaw, Money Manager at Which ?, said: “These important changes will give consumers more clarity about their finances and should help them make informed spending decisions.
“It is right that banks are now working with the regulator to provide additional assistance to clients who may need to use an overdraft facility to help them manage their finances during the downturn. coronavirus epidemic.
“FCA needs to closely monitor developments in this area, including competitive pricing, to ensure that its transformation from overdraft to current account is up to the customers. “
Here is a summary of what the major providers have already announced about their new overdraft rates and the measures put in place to temporarily provide relief for borrowers affected by the coronavirus:
Royal Bank of Scotland / NatWest / Ulster Bank
New price: A rate of 39.49% would have been introduced on April 1 for NatWest customers, and March 30 for RBS and Ulster Bank customers. But customers will continue to pay their current interest rate for at least three months – a maximum of 19.89% for arranged and unorganized borrowing.
Abandonment of overdraft: In addition to the rate freeze, the bank also removed all other overdraft fees and charges, so all customers who use their overdraft for the three months from March 30 will pay less.
National construction company
New price: Nationwide introduced a rate of 39.9% in November 2019.
Abandonment of overdraft: The Company will not charge interest on overdrafts from April 20 to July 1 for those financially affected by the coronavirus. Clients can request a free overdraft interest holiday by completing an online form. Nationwide will send an email or SMS to acknowledge receipt of requests.
Lloyds Banking Group
New rate : The majority of customers will pay 39.9% (29.9% for Club Lloyds). As the group takes a “risk-based” approach to overdrafts, some clients will pay 49.9%.
Abandonment of overdraft: All customers will be able to have an interest-free stamp of £ 300 from April 6 to July 6. As a result, Lloyds said all of its short clients will pay less starting April 6. He said 90% of customers would have paid less. for their overdraft even though the £ 300 cushion on his accounts was not introduced.
New price: A 35% rate went into effect on March 22.
Overdraft relief: Barclays waives all overdraft interest from March 27 until the end of April 2020, which means that clients will not be charged any fees for using their agreed overdraft. Interest will be automatically removed.
Barclays is revising the measurements after this date and will contact customers shortly.
New price: HSBC imposed a new rate of 39.9% on March 14. But it is now temporarily reducing the rate charged above its interest-free cushion to 19.9%.
Abandonment of overdraft: Along with the rate cut, HSBC said that from April 9, for a three-month period, it would increase the temporary interest-free cushion for millions of customers overdrawn from bank accounts and early accounts from £ 300 to £ 500.
New price: Santander previously said it will be 39.9% from April 6, but plans to make another statement in due course.
Overdraft relief: Santander will automatically waive interest on the first £ 500 of any arranged overdraft used between April 6 and July 9.
New price: A 35.9% rate was supposed to go into effect on April 4 – but that was postponed to July 3.
Overdraft relief: Clients with an existing arranged overdraft will benefit from interest relief up to £ 500 from using the arranged overdraft until July 3.
New price: TSB previously announced a rate of 39.9%.
Overdraft relief: The TSB has introduced measures, including fee waivers or the implementation of an interest freeze on their overdraft.
It is looking to make changes to align with FCA guidance, effective April 9.