LYG Lloyds Banking Group Plc

By Adam Clark

U.K. banks will be banned from charging higher prices for unarranged overdrafts, under new proposals from the Financial Conduct Authority to clamp down on expensive lending.

The FCA said Tuesday that overdrafts had become a "dysfunctional" market with people living in deprived areas most likely to be penalized by higher fees. The regulator noted that in 2017, companies made more than 2.4 billion pounds ($3.0 billion) from overdrafts.

Under the new rules, banks will only be able to charge a single interest rate on overdrafts, with no fixed fees. Lenders will also have to advertise their overdraft rates in a standardized manner and will be pressured to do more to identify customers in financial difficulty.

"Today we are proposing to make the biggest intervention in the overdraft market for a generation. These changes would provide greater protection for the millions of people who use an overdraft, particularly the most vulnerable," FCA Chief Executive Andrew Bailey said.

The FCA also reiterated proposals outlined in May in the home-collected credit sector, which would prevent companies from offering new loans or refinancing during home visits apart from at the customer's request. The FCA previously said it expects its home-collected credit proposals to save customers more than GBP34 million a year.

Consultations on the proposed measures remain open until March 18. The FCA intends to consider feedback before publishing policy statements in June.

Write to Adam Clark at adam.clark@dowjones.com; @AdamDowJones

(END) Dow Jones Newswires

December 18, 2018 06:06 ET (11:06 GMT)

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