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Overdrafts are ‘unfair, unclear and over-complicated’

10 Apr 2014

Citizens Advice Scotland has responded to findings by the Financial Conduct Authority (FCA) that bank account overdrafts have ‘complex and opaque’ charges and are often difficult for consumers to understand.

The FCA also found that banks have incentives to raise revenue by increasing limits on customers’ overdrafts. As a result the FCA have announced that they will consider introducing new rules on overdrafts in Autumn 2014. 

Our own research of CAB clients show overdrafts are unfair – they are disproportionate to the level of infringement, they penalise low income customers for being poor, and trap many in a cycle of debt for an overdraft that can be as little as a penny. 

Citizens Advice Scotland’s consumer spokesperson Fraser Sutherland says: 

“This research is a damning indictment of the way in which some high street banks operate their overdraft facilities for customers. CAS has long pointed out the unfair, unclear and over complicated charges that Scotland’s consumers face in overdraft charges. 

“The Competition Commission produced research showing many individuals have given up on using their overdraft as they no longer trust their bank.  Many are now turning to payday lenders as an alternative. 

“It is a sad fact that banks often increase overdrafts on customers’ accounts as a way to increase their revenue without really considering the individuals’ credit needs and wants. It is now clear that the voluntary ‘fair charges’ code that was introduced in 2011 by agreement between Government and the banks has failed to protect all consumers and we support the regulator taking stricter action to enforce new rules.” 


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