A dramatic shakeup of the financial sector could herald the end of free banking in the UK, with all customers required to pay a monthly fee to keep their current accounts open. The financial services regulator has announced a series of major reforms to the overdraft market that consumer rights champions say will stamp out “hideous charges designed to entrap people in debt”.
Once banks and building societies are prohibited from charging customers fees for borrowing money using an unplanned overdraft, it could become the norm for institutions to impose a monthly “management fee” on all current accounts. Banks and building societies will be banned from charging people who go beyond their overdraft limit fixed daily or monthly fees from 6 April 2020 under the sweeping reforms unveiled by the Financial Services Authority (FCA). However, experts say the new rules mean banks and building societies will be scrambling to find a way to recoup their costs and will likely be considering introducing fees for current account holders.
When it comes to recouping costs, normally a bank or building society would need to review their entire range of banking products – any perks or fees on accounts would be looked at to see if they can be sustained. They might chop the perks they are currently paying out or they could add a management fee onto current accounts. If that becomes the norm, of course customers will be irritated but that’s unfortunately how banking shakeups work…banking is a service, and banks need to make money.