UK: Financial regs pick up overdraft case where OFT failed

The Financial Conduct Authority is set to probe controversial overdraft policies five years after banks scrutinized for the practice won a challenge against the former Office of Fair Trading over the issue in the UK’s highest court.

Reports say the FCA is taking on a major review of the banking industry, including review of how lenders establish and monitor overdraft fees, after it gained the power to do so with the introduction of the Competition and Markets Authority, which combined the OFT and Competition Commission, earlier this month.

The FCA announced plans to review the overdraft business, acknowledging that “unarranged overdrafts still carry high charges and the terms set by banks can be so complex and opaque that even the most astute customer could struggle to understand what they are paying for.” Following the investigation, the FCA has the ability to implement guidelines or restrictions on how much banks can profit from overdraft charges.

It would be a victory for consumers years after they were left defeated when the UK’s highest court reversed a previous ruling that placed overdraft regulation under legislation that regulates consumer contracts, which fell under the OFT. In 2009, eight banks, including HSBC and RBS, challenged that decision and won.

Full Content: Businessweek

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