Proposed change to overdraft rules could raise costs for consumers

In what the Financial Conduct Authority (FCA) is calling the “biggest intervention in the overdraft market for a generation”, the regulator has proposed changes to enforce banks to charge a single interest rate for all types of overdraft. It also proposes banning banks from charging higher fees for unarranged overdrafts than for planned overdrafts.

MPs have however expressed concerns that this change could lead to the end of free banking, as banks seek to find alternative sources of revenue to make up for the loss.

Commenting on the concerns, Charles Randell, Chair of the FCA, says: “The bad news for [customers] is they are not getting free banking now.

“They are paying for their banking services through quite low returns on deposits and quite high and … random charges for their overdrafts.”

He also adds that, with the rise of fintech, banks could well miss out on payment and transaction fees anyway, leading them to seek alternative fee sources.

With a range of funding options available to SME owners these days, and the escalating costs, the traditional lenders are becoming less relevant. But, while demand for alternative finance is likely to increase this year, what is essential is that SME’s choose a specialist adviser who can recommend the right financial products for their specific business needs.

Our partner business, BM Structured Finance, specialises in sourcing and restructuring debt finance for SME businesses. We match the most suitable products to each individual circumstance and work together to ensure compatibility and satisfaction, thereby enhancing the business’ cashflow liquidity and facilitating maximum growth.

Cashflow forecasting and budgeting models are also becoming increasingly important, not only to help you plan your finances, but they are commonly requested by banks and other providers of finance. And that’s where our experts at Beavis Morgan can help.

Whether you are a startup or a well-established business, cash is king and managing its flow is crucial to your long-term success.

For more information about how BM Structured Finance can help you and your business, contact Simon Belton. Alternatively, please get in touch with Steve Govey your usual Beavis Morgan Partner.