In practice, this will mean that much like the payday loans market, which has been effectively and sensibly regulated by the FCA to prevent unscrupulous companies charging customers well over the odds, overdraft providers such as banks will not be able to charge whatever they want.
In relation to the housing market and construction sector in the United Kingdom (which has seen a slowdown in recent months), reducing the amount of debt people have outstanding in the form of unarranged overdrafts, should allow consumers the money they need to invest in their properties.
Finance watchdog FCA has said the overdraft change is the biggest overhaul in this generation.
Stopping banks and building societies from charging higher prices for un-arranged overdrafts than for arranged overdrafts.
"Vulnerable consumers are disproportionately hit by excessive charges for unarranged overdrafts, which are often 10 times as high as fees for payday loans", Bailey explained.More news: Explosion in Swedish town damages buildings, injures 25
The changes will make overdrafts simpler, fairer, and easier to manage and will protect the millions of consumers that use overdrafts, particularly more vulnerable consumers, the FCA said in a statement.
Britain will from next year force the country's banks to slash overdraft charges, helping millions of consumers, in particular the more vulnerable, regulators announced today.
"Our radical package of remedies will make overdrafts fairer, simpler and easier to manage".
FCA research also found consumers want to see the cost of borrowing set out in pounds and pence alongside an April and interest rate, which trade association UK Finance has agreed to implement alongside the FCA's remedies.
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The changes should reduce the typical cost of borrowing £100 through an unarranged overdraft from £5 a day, to less than 20p.
The Financial Conduct Authority (FCA) said the market was causing significant harm to consumers.
Under the new measures, which were first proposed in December, banks will also be required to charge a simple annual interest rate on all overdrafts, and overdraft advertisements will need to come with that rate clearly displayed, to help consumers compare various products.
She said: "Overdraft charges can have serious knock-on effects for people's debt and mental health". The reform to overdrafts will not come into effect until April 2020.More news: In Wayanad, Rahul Gandhi launches first attack on new Modi government