The FCA has published the findings from research into the overdraft market. The research is part of the FCA’s new approach to consumer credit and its remit to closely monitor how firms treat their customers.

The findings of the research are set out in two documents:

  • Consumer credit insights – overdrafts; and
  • Consumer credit qualitative research: credit cards and unauthorised overdrafts.

The research indicates that consumers:

  • do not consider overdrafts when choosing a bank account;
  • often do not see overdrafts as debt and quickly become accustomed to them;
  • are unaware of how much overdrafts cost and are confused by unauthorised overdrafts; and
  • do not actively repay overdrafts.

As for overdraft providers, the FCA has concluded that they:

  • can earn revenue from consumers’ lack of understanding, confusion and limited attention;
  • have incentives to raise revenue by increasing overdraft limits; and
  • have historically had very high, complex and opaque charges for unauthorised overdrafts which appears to remain the case.

The FCA will now be investigating how providers set and monitor overdraft limits and their governance and strategies for doing so. As part of these next steps, the FCA will also consider making some voluntary measures mandatory in autumn 2014. The FCA will also work alongside the Competition and Markets Authority to make sure any action complements its current work updating the OFT’s 2013 review of the current account market.

View FCA research shows many consumers paying too much for overdrafts, 10 April 2014