Royal Bank of Scotland has overhauled its unarranged overdraft fees in a revamp that leaves many customers paying higher charges, a move that comes as the City watchdog this week said it was weighing taking action on unsecured consumer credit.
The state-backed lender has written to customers during the past few months to flag that it has capped its maximum monthly charge for unarranged overdrafts to £72, down from £90.
However, the bank has also increased its daily fee for falling into an unarranged overdraft from £6 to £8.
It means that a customer who borrows £11 for nine days will pay £72, representing 655 per cent of the original amount borrowed, instead of the previous rate of £54.
Under the old structure, customers would have to borrow £11 for a longer period of 12 days to incur a £72 charge.
RBS said that under 5 per cent of its personal customer base falls into unarranged borrowing.
RBS admitted that customers “typically borrow between £50 and £60 over an average of four days.”
The bank added: “In making changes to our unarranged overdraft charging we looked to reduce maximum costs for those who are really struggling.”
Andrew Hagger of the Moneycomms consumer site said: “The banks are keen to ensure their monthly maximum charge is not out of line with their peers.
“However many customers of NatWest and RBS will not see a reduction in their unauthorised bank charges . . . the daily fee has been hiked from £6 to £8 so it’s giving with one hand and taking away with the other.”
The changes come as the Financial Conduct Authority revealed it is poised to clamp down on unarranged overdraft fees.
The watchdog said on Monday that it is considering intervening in unarranged overdrafts after it found that bank charges are “potentially harmful” to consumers.
It had “significant concerns” about unauthorised overdrafts, adding there was a case to “consider fundamental reform” following its latest review of the UK’s high-cost credit market.
The FCA has the power to ban products such as unarranged overdrafts and will spend the next eight months reviewing what action to take.
However, it added that it recognised the “potential benefits of consumers having some flexibility to borrow above agreed levels” and that it would “aim to develop solutions that preserve useful parts of the market while addressing the harm we observe”.
“Any regulatory intervention that reduces one revenue stream is likely to have an impact elsewhere,” it said, noting that banks also gain income from packaged bank accounts, foreign exchange fees and interest foregone, for example.