Banks agree to fairer overdraft rules

| November 21, 2011 | 0 Comments
Banks agree to fairer overdraft rules

Major UK banks including Barclays, HSBC, Lloyds, Royal Bank of Scotland and Santander have signed up to a scheme designed to help customers avoid going into the red.

A text alert system, already used by some banks, which warns customers when they are nearing their overdraft limit, will be extended to all High Street banks from April and customers will also have the option of receiving phone or e-mail alerts.

The alerts will inform customers exactly when charges will be imposed, giving them the opportunity to move funds into their accounts to prevent the charge coming into effect.

From April 2013, banks will have to provide a buffer zone of £5 to £10 beyond an overdraft limit.

If a customer goes into the buffer zone for a short period, no overdraft charges will be incurred.

Customers will also be able to opt out of overdraft facilities, so that they will be unable to go into the red.

Other changes include simplifying the process of switching bank accounts.

By September 2013 banks will be required to redirect all payments in and out of an old account into a new one, within seven working days.

Retailers will no longer be able to offer their customers discounts on purchases in return for taking out a store card at the point of purchase, and direct commission for sales staff will be banned.

Mark Hoban, financial secretary to the Treasury, said: “The public told us they felt overdraft charges were unclear, and that it was unfair to be penalised for only going over your limit by a few pounds.

“We’ve listened to these concerns and have worked with industry to develop a strong package of measures in response.”

The proposals were published today in a response by the Department for Business, Innovation and Skills (BIS) and HM Treasury to the Government’s Review of Consumer Credit and Personal Insolvency.

The treasury today ordered all UK banks and financial institutions to cut ties with Iran.

The move is due to concern over Iran’s nuclear programme following a report by the International Atomic Energy Agency.

Tags: Iran, , Review of Consumer Credit and Personal Insolvency, text alert

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